Israel`s credit ratio reduced over conflict hazard
Date
2/20/2024 5:23:27 AM
(MENAFN) Moody's, the international credit ratings agency, has taken the unprecedented step of downgrading Israel's credit rating for the first time, citing Political and fiscal risks stemming from the country's continued conflict with the Palestinian militant group Hamas. The credit score was lowered to A2, marking the sixth-highest investment grade, with a "negative" outlook, indicating the potential for further downgrades.
In a statement on its website, Moody's highlighted the material increase in political risk for Israel due to the ongoing military conflict with Hamas. The agency expressed concerns about the aftermath of the conflict and its wider consequences, emphasizing the impact on Israel's executive and legislative institutions, as well as its fiscal strength in the foreseeable future.
Moody's acknowledged that while the intensity of fighting in Gaza may diminish or pause, there is currently no agreement in place to durably end hostilities. Additionally, there is no consensus on a longer-term plan that would fully restore and strengthen security for Israel. The agency also anticipated that Israel's debt burden would be materially higher than projected before the conflict.
The credit rating agency had placed Israel's credit rating on review in October, less than two weeks after the country declared war on Hamas following a surprise attack by the militant group that resulted in casualties among Israelis. Moody's decision to downgrade Israel's credit rating reflects the ongoing uncertainties surrounding the conflict and its potential consequences on the country's economic stability.
While Moody's has taken this significant step, other credit rating agencies, including S&P and Fitch, have placed Israel on negative ratings watch but have not yet downgraded its credit score. S&P warned last month of a potential sovereign rating cut if the conflict with Hamas expands to other fronts, such as Lebanon or Iran. The downgrade by Moody's underscores the economic challenges Israel faces in the midst of geopolitical tensions and the need for strategic measures to address the broader implications for the country's financial landscape.
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