Ratings agency S&P Global has lowered Israel’s long-term credit rating to ‘A’ from ‘A+’, citing growing risks to the country’s economy and public finances due to the escalating conflict with the Iranian-backed armed movement. Hezbollah, in Lebanon. This downgrade reflects concerns about security in the region and the economic impacts resulting from hostilities.
S&P noted that retaliatory rocket attacks on Israel, which could intensify, will exacerbate the economic fallout. In addition, he noted that military activity in the region could continue until 2025, negatively affecting the economic outlook.
Moody’s also downgrades Israel’s rating
S&P’s action follows the decision of the agency Moody’s, which last week cut Israel’s rating by two levels, placing it at “Baa1”, and warned that the country could fall into the “junk bond” category if the Current tensions with Hezbollah escalate into full-scale conflict.
Economic impact and negative outlook
In its statement, S&P Global kept Israel’s outlook at “negative,” underscoring the growing uncertainty surrounding the conflict with Hezbollah and its potential repercussions on the country’s economic stability.
The agency noted that although Israel has proven resilient in the face of external threats in the past, the current escalation presents much more significant risks. The prolonged conflict, coupled with rising military costs, could weaken Israel’s ability to maintain economic growth, especially if government resources are diverted toward bolstering security and rebuilding infrastructure.
Additionally, the possibility of a ground incursion into Lebanon raises fears of a long-running conflict, which could negatively affect key sectors such as tourism, technology exports and foreign investments.
S&P warned that while Israel has maintained a strong financial position in the past, the costs of a protracted war and domestic political uncertainty could lead to long-term fiscal weakening, putting at risk the stability of public finances and the country’s rating in the coming years.
Conclusion
The downgrade of Israel’s credit rating by S&P Global and Moody’s is a reminder of the enormous challenges facing the country in the context of a protracted conflict with Hezbollah.
As tensions continue and the risks of military escalation increase, the Israeli economy will come under further pressure, especially if the conflict extends into 2025 as S&P predicts.
In a scenario of increasing military costs and potential impacts on key sectors of the economy, the country will have to balance its security commitments with its fiscal stability.
The international community, investors and rating agencies will continue to closely monitor developments in the situation, as any escalation could have significant repercussions not only for Israel, but also for the region as a whole.
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