Moody’s Downgrades Israel’s Credit Rating Amid Gaza War
International credit rating agency Moody’s Investors Service announced on Friday that it was downgrading Israel’s debt rating from A1 to A2 due to projected economic and political damage induced by the country’s ongoing war in the Gaza Strip.
While Israel’s creditworthiness had never previously dipped below A1, Moody’s official statement indicated that the historic downgrade was based largely on an “assessment that the ongoing military conflict with Hamas, its aftermath, and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength for the foreseeable future.”
Although Israel’s history of military conflict never negatively affected the country’s investment profile previously, Moody’s analysis assumes the scope and scale of the war against Hamas “raises the possibility of a longer lasting and material credit impact.”
The reassessment, however, was not a complete surprise, as Moody’s had already publicly warned that Israel’s rating was in danger only two weeks after the October 7 attack that launched the entire region into turmoil.
The global credit agency, widely viewed as the most influential institution of its kind, specified on Friday that Israel’s assumed increases in defense spending, expected to be almost double 2022 levels by the end of 2024, will balloon the deficit. The statement added that the military budget may grow even further in subsequent years as “there is no clarity on the likelihood, time frame, and durability of a possible ceasefire agreement.”
