S&P cuts Israel’s long-term credit ratings citing MidEast escalation
Amid the ongoing war in Gaza and the Israel-Iran rising tensions, the agency also lowered Israel's credit outlook from 'stable' to 'negative'
Ratings agency S&P Global on Thursday cut Israel’s long-term ratings credit rating from AA- to A+. Additionally, Israel's credit outlook has been downgraded from 'stable' to 'negative.'
The announcement came unexpectedly, with S&P's official decision on Israel's credit rating anticipated on May 10. The agency cited the duration of the war in Gaza as well as the Israel-Iran tensions.
“We forecast that Israel’s general government deficit will widen to 8% of GDP in 2024, mostly as a result of increased defense spending,” said S&P Global in its statement.
S&P's predicted that the war in Gaza will continue, probably at a lower intensity, throughout 2024, with routine exchange of fire with Hezbollah in the north. Meanwhile, the agency believes there will be no direct conflict between Israel and Iran.
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Prior to the Friday reports of Israel's attack on Iran, S&P wrote: "We currently see several possible military escalation risks, including a more substantial, direct, and sustained military confrontation with Iran."
"Israel is under international pressure to restrain its response to the April 13 attack, while Iran has announced its intention not to escalate. However, in our opinion there remains risks of an accident or miscalculation, especially if there are more exchanges of fire between the two sides."
Another scenario suggested by S&P included escalation with Hezbollah. "Expansion of the current conflicts might present additional defense and social risks for Israel, which could affect a range of economic and fiscal indices, in contrast to our basic scenario."