Credit ratings agency Moody’s on Friday concluded its review of Israel and downgraded the country to “A2” from “A1”, citing material political and fiscal risks for the country due to its war with Hamas.“A2” is five notches above investment grade, while its credit outlook was kept at negative by Moody’s, meaning a further downgrade is possible.“While fighting in Gaza may diminish in intensity or pause, there is currently no agreement to end the hostilities durably and no agreement on a longer-term plan that would fully restore and eventually strengthen security for Israel,” Moody’s said in a statement.
Moody’s said the credit rating drop came following an assessment of Israel’s current climate. “The ongoing military conflict with Hamas, its followingmath and wider consequences materially raise political risk for Israel, as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” the statement said.The agency also mentions the looming threat of escalation with Hezbollah along the Israel-Lebanon border. Moody’s sent a warning to Israel shortly following the October 7 massacres, just days before a scheduled rating review that a prolonged war with Hamas might drag down the country’s credit score. Graph showing recession economy (credit: PIXABAY)
October 7 massacre leaves nation, and economy, in distress
Surprise attacks by Hamas had sparked the worst escalation in violence in 50 years and raised questions regarding not just the humanitarian cost, but the economic toll as well.
Moody’s, which was scheduled to review Israel’s “A1 stable” rating, said the chances of a downgrade would depend on how the war develops.