The Fitch rating agency on Monday night reduced Israel's credit rating to A, from A+, as a result of the continuation of the war in Gaza and the increase in geopolitical risks, according to a statement; a decision that the Israeli Finance Minister described as “natural.”
“Israel is in the middle of an existential war, the longest and most expensive in its history,” said the head of Finance, the far-right Bezalel Smotrich, close to midnight in his X account. “The war is being fought on several fronts and has been going on for almost a year. The downgrade amid the war and the geopolitical risks it creates is natural,” he added.
The Prime Minister's Office, Benjamin Netanyahu spoke on the matter this Tuesday to ensure that the Israeli economy “is solid and works well.”
“The reduction in the rating is a consequence of Israel facing a war in multiple scenarios that was imposed on it,” he assured, promising that the rating will rise again when the country wins the war, which leaves nearly 40.000 dead in Gaza.
According to Fitch projections, the budget deficit in 2024 could reach 7,8% of GDP and debt will remain above 70% of GDP in the medium term. Furthermore, the World Bank's governance indicators are likely to deteriorate, which will affect Israel's credit profile.
For his part, Smotrich announced that the Government “will approve a responsible budget [for 2025] that will continue to support all war needs" and expressed confidence that Israel's credit rating will subsequently increase "very quickly."
Already last February, the credit rating agency Moody's lowered for the first time in its history its solvency assessment of the Israeli economy due to the war conflict in Gaza, which today exceeds ten months of war.
The US agency assigned a “negative outlook” to its new rating, which it reduced from A1 to A2. In April, ratings agency S&P Global did the same, reducing Israel's long-term rating from AA- to A+ following Iran's drone and missile attack that month and due to other geopolitical risks, according to a statement.
“We forecast that Israel's general government deficit will widen to 8% of GDP in 2024, primarily as a result of increased defense spending,” estimated S&P Global, adding that “the war between Israel and Hamas and the confrontation with Hezbollah “They seem destined to continue throughout 2024.”
Agencies contributed to this Aurora article.