Israel's credit rating downgraded

In a statement released by the credit rating agency, it was announced that Israel's long-term foreign and local currency credit rating has been lowered from "AA-" to "A+", with the rating outlook remaining "negative".

The statement pointed out that the recent increase in confrontations with Iran has further heightened the already high geopolitical risks for Israel. While it is expected that a wider regional conflict will be avoided, the statement noted that, contrary to S&P's previous assumption that military activities would not last longer than six months, the conflicts now appear likely to continue throughout 2024.

The statement also noted that Israel's general budget deficit is projected to rise to 8 percent of its gross domestic product in 2024, largely as a result of increased defense spending.

While the statement indicated that a wider regional conflict is not S&P's base-case scenario, it emphasized that such a conflict could have a more significant negative impact on Israel's security situation and, consequently, on its economic, fiscal, and balance of payments parameters.

The statement further noted that the Israeli economy is expected to grow by 0.5 percent this year, following a 2 percent growth in 2023, and that the country's economy contracted by 5.7 percent in the last quarter of last year.