Fitch downgrades Israel's credit rating

The statement noted that the downgrade reflects the impact of the ongoing war in Gaza, heightened geopolitical risks, and military operations on multiple fronts, pointing out that Israel's public finances have taken a hit.

The statement recorded that Israel is projected to run a budget deficit of 7.8 percent of its gross domestic product (GDP) this year, and that debt is expected to remain above 70 percent of GDP in the medium term.

CONFLICTS MAY LAST UNTIL 2025

Emphasizing that geopolitical risks also support the country's negative outlook, the statement conveyed that the conflict in Gaza could last until 2025 and that there are risks of it spreading to other fronts.

The statement drew attention to the fact that, in addition to human casualties, the conflict could lead to significant additional military spending, destruction of infrastructure, and more prolonged damage to economic activity and investment, which could lead to a further deterioration of Israel's credit metrics.

TEL AVIV-TEHRAN TENSION

Recalling that tensions between Israel and Iran and its allies remain high, the statement indicated that recent attacks highlight the risk of escalation that could further damage Israel's credit profile.

The statement pointed out that the war is likely to continue until the end of 2024 and that there is a risk of continued intense operations, noting that this means continued high spending for urgent military needs and disruptions to production in border regions, as well as to tourism and construction.

Fitch's statement noted that a prolongation or escalation of the conflicts, which would have a significant and long-term impact on the economy and public finances, could lead to further downgrades.

News Source: AA