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The international credit rating agency Standard and Poor's (S&P) announced on Tuesday that it has downgraded Israel’s long-term credit rating from "A+" to "A" with a negative outlook, citing increasing security risks due to the ongoing conflicts with Hezbollah in Lebanon and Hamas in the Gaza Strip.
S&P's decision is driven by the "increasing likelihood that Israel's conflict with Hezbollah, given the recent escalation of fighting, will be prolonged and intensified, leading to risks to Israel's security," the agency explained in a statement. S&P estimated that the military activity in Gaza, along with the escalation of hostilities on Israel's northern border, which includes ground operations on Lebanese soil, "may last until 2025," heightening "risks of retaliation against Israel."
The agency highlighted the recent attack by Iran, in which approximately 180 missiles were launched against Israeli territory. This assault was framed as a retaliation for the deaths of regional allies, namely the leaders of Lebanese Hezbollah, Hassan Nasrallah, and Palestinian Hamas, Ismail Haniya.
As a consequence of the extended conflict, S&P warned, "we expect the recovery of the economy to be delayed," while predicting a rise in Israel's budget deficit over the short to medium term due to sustained increases in military expenditures. The agency also adjusted its forecast for Israel’s economic growth, now predicting stagnation in 2024 and a reduced GDP expansion rate of 2.2% in 2025, down from an earlier estimate of 5%.
Despite the downgrade of Israel’s long-term rating, S&P left the country’s short-term rating unchanged at "A-1."
This comes shortly after Moody’s, another credit rating agency, downgraded Israel’s sovereign debt for the second time in 2024, lowering it from 'A2' to 'Baa1' with a negative outlook. Moody’s explained its move by noting that "the intensity of the conflict between Israel and Hezbollah has greatly increased in recent days."
By fLEXI tEAM
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