U.S. S&P lowered Israel’s credit rating from 4 to 5
Downgrade linked to recent tensions with Iran
In February, Moody’s further reduced it to level 6 over Gaza Strip concerns, while Fitch retains a level 5 rating.
One of the world’s three major credit rating agencies, U.S.-based Standard & Poor’s (S&P) Global, downgraded Israel’s credit rating by one notch this month following an Iranian drone and missile strike. This is the second time the three major credit rating agencies have downgraded Israel’s rating since the Palestinian conflict began in October last year.
According to the Wall Street Journal (WSJ), S&P announced on the 18th (local time) that it has lowered Israel’s long-term national credit rating from AA- to A+ and has maintained a negative outlook. AA- is the fourth highest rating in S&P’s grading system.
A+ is the fifth-highest rating shared by countries like China and Bermuda.
S&P stated, “The recent escalation of conflicts with Iran has heightened the geopolitical risks already facing Israel.” They added that while they do not view the escalation of the situation in the Middle East as a basic scenario, it could have a more significant negative impact on Israel’s security and could also affect the economy, finances, and international balance. Furthermore, S&P pointed out that due to increased defense spending, Israel’s fiscal deficit is expected to rise to 8% of its GDP this year and remain high in the medium term.
This is the first time S&P has downgraded Israel’s credit rating since October 7 last year when Hamas, supported by Iran, attacked Israel. Another of the top three rating agencies, U.S.-based Moody’s, pointed out the war between Israel and Hamas last February and downgraded Israel’s credit rating from the fifth highest rating of A1 by one notch to A2. At the time, Israel’s Finance Minister Bezalel Smotrich claimed that “the Israeli economy is robust by all standards” and argued that Moody’s downgrade was irrational and politically motivated.
The remaining rating agency, Fitch, designated Israel as a Negative Rating Watch (RWN) in October last year and removed the RWN classification on the 2nd of this month. Fitch currently rates Israel’s credit as A+, the same fifth rating as S&P, and reports a negative outlook.
