US rating agency Moody’s Investor’s Service downgrades Israel’s credit rating for a second time this year, but this time by two notches, citing the increased intensity of the fighting between Israel and Lebanon’s Hezbollah terror group and expectations of a prolonged war.
The rating agency cut Israel’s credit score from A2 to Baa1 and maintains a negative outlook raising concerns that domestic political risks have increased alongside geopolitical risks.
- “With heightened security risks (a social consideration), we no longer expect a swift and strong economic recovery as in previous conflicts,” Moody’s says.
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“In turn, a delayed and slower economic recovery in combination with a more prolonged and broader military campaign will more persistently impact public finances, further pushing out the prospect of a stabilization of the public debt ratio, compared to our earlier projections.”
- “In our view, the significant escalation in geopolitical risk also points to diminished quality of Israel’s institutions and governance which have not fully mitigated actions detrimental to the sovereign’s credit metrics,” the rating agency cautions.
Moody’s downgrade came following a week of almost non-stop Israeli strikes that have devastated the Lebanese terror group’s senior command, on the heels of a wave of detonations of Hezbollah operatives’ communications devices, widely blamed on Israel.
Since the war began with the Hamas-led October 7 attack, all three major credit rating agencies — Moody’s, S&P, and Fitch — cut Israel’s sovereign rating and maintained a negative outlook, leaving the door open for further downgrades if the security situation escalates or the country’s fiscal position deteriorates.
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Back in February, Moody’s lowered Israel’s credit rating from A1 to A2 — the first ever downgrade — and changed its outlook to “negative,” citing the impact of the ongoing Gaza war on the government’s debt burden, as well as fiscal and political risks.
Source:Sharon Wrobel – TOI