Third rating organization demotes Israel

(MENAFN) On Tuesday, Fitch Ratings downgraded Israel’s long-term credit rating from ‘A+’ to ‘A,’ citing the ongoing conflict in Gaza and its economic repercussions. This move follows similar actions earlier this year by Moody’s and S&P Global, which also reduced their ratings for Israel due to heightened geopolitical risks.

Fitch’s downgrade reflects concerns over the prolonged nature of the Gaza conflict, which they anticipate could extend into 2025 or beyond. The agency warned that the conflict might expand to other regions, potentially resulting in increased military expenditures, infrastructure damage, and a detrimental impact on economic activity and investment. Such factors could further weaken Israel’s credit metrics, Fitch noted.

Additionally, Fitch pointed to Israel’s growing budget deficit and escalating government debt as significant factors in the rating reduction. In response, Israeli Finance Minister Bezalel Smotrich described the downgrade as expected given the geopolitical situation, asserting that the government will manage the economy "correctly and responsibly."

However, Yair Golan, chairman of the Israeli Labor Party and former deputy economy minister, expressed concerns that the downgrade, combined with the budget deficit, would negatively affect citizens by raising living costs. Golan criticized Smotrich’s handling of the economy, labeling him as inadequate in managing Israel’s financial challenges.

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