Moody’s Downgrades Israel’s Credit Rating Amid Gaza War Fallout
Watan-Moody’s agency has downgraded Israel’s credit rating, citing political and financial risks to the occupying state due to the Gaza war.
Moody’s stated that the conflict’s impact raises political risks and weakens executive and legislative institutions in Israel, along with its financial strength in the foreseeable future.
Israel’s credit rating was downgraded to “A2”, five grades above the investment grade, while Moody’s maintained its credit outlook as negative, indicating the possibility of another downgrade.
Moody’s stated: “While the fighting in Gaza may recede or halt, there is currently no agreement to permanently end hostilities, nor is there an agreement on a longer-term plan to fully restore and ultimately enhance Israel’s security.”
عاجل | رويترز: موديز تخفض التصنيف الائتماني لإسرائيل إلى A2 مع نظرة مستقبلية سلبية
— الجزيرة – عاجل (@AJABreaking) February 9, 2024
The agency also anticipated an increase in Israel’s debt burdens beyond pre-war expectations, with defense spending reaching nearly double the 2022 level by the end of this year.
Credit ratings typically reflect a country’s ability to obtain loans and the confidence in its ability to fulfill financial obligations on time. The better the rating, the lower the borrowing risks, resulting in better terms and lower costs for borrowing.
Netanyahu’s comment
In response, Israeli Prime Minister Benjamin Netanyahu quickly downplayed the significance of the downgrade, claiming that Israel’s economy is robust.
Netanyahu stated that the credit rating downgrade was due to the war, adding that “the economy will bounce back after victory,” according to him.
Weakening of Israel’s banking environment: Fitch Ratings previously stated that any major escalation or widening of the war could weaken
Netanyahu’s comment
عاجل | موديز: سبب تخفيض تصنيف إسرائيل هو الحرب مع حماس وتداعياتها التي تزيد من المخاطر السياسية على إسرائيل
— الجزيرة – عاجل (@AJABreaking) February 9, 2024
The agency added in a report on Israeli banks that the escalation scenario could pressure Israel’s ratings in 2024.
It noted that Israeli bank ratings are supported by sovereign support, “reflecting Fitch’s view that there is a very high likelihood of Israel providing support to banks when necessary.”
Economic activity contraction in Israel: The war caused a contraction in economic activity in Israel, harming sectors such as services, tourism, real estate, banking, and agriculture.
The deficit in the Israeli economy is expected to jump by another 134 billion shekels ($36 billion) in the years 2025-2027.
This is according to new calculations for the upcoming three-year plan prepared by the Budget Department at the occupying Treasury Ministry. The debt, which continues to rise, will be affected by interest payments as well as war expenses.
