International rating agency S&P downgraded Israel’s sovereign rating for the second time in recent months, reiterating its negative outlook, meaning further downgrades are expected over the next 18 months. The rating was downgraded from ‘A+’ to ‘A’, which is a ‘medium to high rating’.
“Given the recent escalation in fighting, we believe the conflict between Israel and Hezbollah is increasingly likely to prolong and intensify further, posing security risks to Israel,” S&P analysts said. “The company believes that the fighting in the Gaza Strip and the Palestinian Territories is escalating,” he added. The escalation of fighting on the northern border could continue into 2025, with the possibility of ground operations in Lebanon and the risk of a counterattack against the Israeli state. ”
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“Therefore, the company expects Israel’s economic recovery to be slow, with real growth forecasts of 0% in 2024 and 2.2% in 2025, with a widening budget deficit in the short to medium term due to further increases in defense spending. %.
S&P expects Israel’s budget deficit to reach 9% by the end of 2024 and shrink to 6% in 2025.
Yari Rothenberg, Israel’s Comptroller General, said: “Israel’s balance of payments remains strong and continues to maintain a large current account surplus with high foreign exchange reserves, which provides security for the Israeli economy. , which points positively to the government’s commitment to play a role in the security of Israel’s economy.” It is necessary to advance fiscal consolidation to prevent the debt-to-GDP ratio from increasing. ”
Despite the downgrade, S&P kept Israel’s credit rating one notch higher than Moody’s. Last week, Moody’s downgraded Israel’s rating by two notches to Baa1, the equivalent of S&P’s BBB+.
Published by Globes, Israel Business News – en.globes.co.il – on October 2, 2024.
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