Ratings agency S&P Global on Thursday downgraded Israel’s long-term credit rating from “AA-” to “A+,” amid already heightened geopolitical risks for the country following last weekend’s escalating conflict with Iran.
“We expect Israel’s general government deficit to widen to 8% of GDP in 2024, primarily due to increased defense spending,” S&P Global said in a statement.
This negative outlook reflects the risk that Israel’s war in Gaza and its conflict with Hezbollah could escalate and impact Israel’s economy beyond what the authorities currently expect.
“We now recognize several possible risks of military escalation, including a more substantial, direct and sustained military conflict with Iran,” the statement said.
On Saturday, Iran’s Islamic Revolutionary Guard Corps said it had launched dozens of drones and missiles toward Israel, an attack that could spark a major escalation between the regional rivals and the U.S. He has promised to support Israel.
Earlier this month, Fitch removed Israel from Rating Watch Negative, maintaining its A+ rating, but cited Israel’s war in Gaza as a risk.
Moody’s downgraded the country’s credit rating in February, citing war risks. Israel’s Finance Minister Bezalel Smotrich said the decision was not based on sound economic grounds and amounted to a pessimistic “manifesto”.
