S&P downgrades 'Israel's' credit rating; economic uncertainty deepens
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In another blow, "Israel's" credit rating has been downgraded from A+ to A, deepening the economic uncertainty facing the Israeli occupation.
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Smoke rises following Israeli bombardment in South Lebanon as seen from northern occupied Palestine, on Oct. 1, 2024. (AP)
Global credit rating agency S&P downgraded "Israel's" credit rating from A+ to A, moving the decision forward by five weeks amid escalations with Hezbollah, which the agency cautioned could result in an all-scale war, reported the Israeli Ynet on Wednesday.
According to Ynet, even though the downgrade was determined before Iran’s response on Tuesday, S&P cited the need for an earlier release due to heightened geopolitical tensions. "The unscheduled announcement was prompted by the significant increase in Israel's geopolitical and security risks," the report stated.
S&P also cautioned that the ongoing war on Gaza and escalating confrontations on the northern front, including "Israel's" failed attempts to launch a ground invasion in Lebanon, could persist into 2025, increasing the likelihood of retaliatory actions. Consequently, the agency adjusted "Israel’s" economic forecast, predicting 0% growth in 2024 and 2.2% in 2025.
The agency also forecast a fiscal deficit of 9% of GDP for this year, exceeding the government's target of 6.6%, and 6% for next year. This move by S&P follows a downgrade from Moody’s just days earlier, which lowered "Israel’s" credit rating by two levels to Baa1.
According to Ynet, Moody’s and S&P had downgraded "Israel’s" rating earlier this year, marking the first time either agency had done so since they began rating "Israel" in the late 1990s. Now, both agencies have downgraded "Israel" again within days, citing the expanding war with the Axis of Resistance.
Fitch, the third major credit rating agency, recently downgraded "Israel's" rating for the first time and is expected to issue another downgrade soon.
Despite the S&P downgrade, "Israel's" A rating remains one notch above Moody's, which now places "Israel" in the B category, grouping it with medium-tier economies.
Israeli economy in ‘serious danger’
A recent report by The Washington Post on September 27 highlighted the significant challenges confronting "Israel's" economy amid Tel Aviv's aggression on Lebanon and Gaza.
"Israel" has experienced a downgrade in its credit rating and a sharp contraction in its gross domestic product. Tens of thousands of businesses have shut down, and an increasing number of jobs are being outsourced. Many Israeli reservists have had to pause their careers or struggle to balance them with military service commitments.
The construction and agriculture industries have also faced significant challenges. According to the Central Bureau of Statistics, tourism has plummeted by over 75%, closing many shop fronts.
On the other hand, military spending has at least doubled, with the Central Bank warning that the ongoing war could cost $67 billion through 2025. This prediction was made prior to "Israel’s" recent escalation in Lebanon and the mobilization of two reserve brigades to the northern front on Wednesday.
“The economy is in serious danger unless the government wakes up,” Israeli economist Dan Ben-David, who heads the Shoresh Institution for Socioeconomic Research, told The Washington Post.
