(MENAFN) In a significant development reflecting heightened geopolitical risks, S&P Global, an international ratings agency, has downgraded Israel's long-term credit rating. The decision, announced on Thursday, follows Moody's earlier downgrade in February, marking a second major United States credit ratings agency to take such action against Israel.
S&P Global cited the increased risk of military escalation with Iran as a key factor contributing to the downgrade. The agency lowered Israel's long-term foreign and local currency sovereign credit ratings from 'AA-' to 'A+', and the short-term ratings from 'A-1+' to 'A-1'. The decision underscores concerns about the potential impact of ongoing conflicts, such as the Israel-Hamas war and tensions with Hezbollah, on Israel's economic, fiscal, and balance-of-payments indicators.
The timing of the downgrade coincided with Israel's military strikes on Iran, further highlighting the precarious geopolitical environment in the region. Recent escalations, including Iran's retaliatory attacks following a suspected Israeli strike in Syria, have heightened tensions and contributed to the reassessment of Israel's creditworthiness.
S&P Global emphasized that while a wider regional conflict may be avoided, the Israel-Hamas war is expected to persist throughout 2024. This prolonged conflict deviates from previous assumptions and poses significant challenges for Israel's budgetary outlook, as economists have cautioned.
The downgrade by S&P Global, along with earlier actions by Moody's and Fitch, underscores the ongoing impact of geopolitical tensions on Israel's economic stability. With all three major United States credit ratings agencies placing Israel on negative ratings watch since the escalation with Hamas in October, the country faces heightened scrutiny and challenges in managing its fiscal and economic trajectory amidst persistent regional conflicts.
As Israel navigates these challenges, the downgrade serves as a sobering reminder of the interconnectedness between geopolitical dynamics and economic performance, highlighting the imperative of diplomatic efforts to mitigate risks and promote stability in the region.
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