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Fitch Ratings has cut Israel’s sovereign debt rating by one notch, maintaining a negative outlook on the debt, as the country’s ongoing military conflict puts pressure on public finances.
According to a statement released on Monday, the ratings firm downgraded the country’s score to A from A-, citing “continuous war” and geopolitical risks as reasons.
Analysts including Cedric Julien Berri and Jose Mantero wrote that the action “reflects the continuing war in Gaza, geopolitical risks, and the impact of military operations on multiple fronts.” “In our view, the conflict in Gaza could last until 2025 and risks spreading to other fronts.”
Human losses, significant additional military spending, destruction of infrastructure and continued damage to economic activity and investment could all lead to a deterioration in credit metrics, Fitch said. It also said tensions in the region “remain high.”
Fitch estimates the country’s budget deficit could widen to 7.8% of gross domestic product this year from 4.1% in 2023, and expects debt to remain above 70% of gross domestic product over the medium term. The average for 2025 for peers with an A rating is 55%, Fitch said.
Moody’s Ratings in February downgraded Israel’s credit rating for the first time on a sovereign, cutting its rating by one notch to A2 with a negative outlook.
“A post-war rating downgrade and the geopolitical risks it creates are natural,” Finance Minister Bezalel Smotrich said in a statement after the decision. “We will pass a responsible budget that will meet all the wartime needs while also maintaining the fiscal framework and fueling the growth engine.”
Israel reported last week that its trailing 12-month deficit widened to 8.1% of gross domestic product in July, from 7.7% at the end of the previous month.
Yali Rothenberg, the accountant general at Israel’s Finance Ministry, said in response to the downgrade, “It is necessary to act as soon as possible to prepare a responsible state budget for 2025 based on the process of rebuilding fiscal reserves through a gradual reduction in the ratio of debt to GDP.”
This article is generated from an automated news agency feed without any modifications to the text.
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