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S&P downgrades 'Israel's' rating to negative citing 'war risks'

  • By Al Mayadeen English
  • Source: Agencies
  • 25 Oct 2023 10:07
3 Min Read

The expansion of the Israeli aggression on Gaza threats the Israeli economy.

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  • A protestor holds a placard reading
    A protester holds a placard reading "Israel kills children" during a demonstration calling for peace in Gaza, at the Place de la Republique in Paris, on October 24, 2023. (AFP)

S&P Global Ratings announced on Tuesday that it was downgrading "Israel's" credit outlook from stable to negative, citing threats to the economy from an expansion of the Israeli aggression on Gaza.

"The negative outlook reflects the risk that the Israel-Hamas war could spread more widely or affect Israel's credit metrics more negatively than we expect," the credit rating agency said in a notice.

"We currently assume the conflict will remain centered in Gaza and last no more than three to six months," it added.

Since Operation Al-Aqsa Flood started, the Israeli occupation has imposed stifling measures on the West Bank, closing all crossings leading to Palestinian territories and checkpoints between cities. These measures were taken to "prevent attacks", Israeli media claimed.

According to Gaza's Health Ministry, over 6,000 Palestinians, many of whom are children, have been martyred in the Gaza Strip as a result of Israeli airstrikes.

Read: 2,300+ Gaza children killed, 5,300+ injured in war: UNICEF

S&P said on Tuesday that it revised the outlook for its "AA-" long-term foreign and local currency ratings on "Israel" to negative.

Commenting on the downgrade, Israeli Finance Minister Bezalel Smotrich described it as "alarmist" and said he did not anticipate major Israeli deficits despite the situation.

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The 2023-2024 budget was "no longer relevant" given the war on Gaza and would be amended, Smotrich added.

While putting the direct cost of the war at around $246 million a day to "Israel", he said in an Army Radio broadcast that he did not yet have an assessment of the indirect costs on an economy partly paralyzed by the mass mobilization of military reservists and extensive Palestinian rocket salvos.

The Israeli government's A1 credit ratings were placed under review for reduction by Moody's Investors Service less than a week ago, citing the "unexpected and violent conflict between Israel and Hamas" as justification for their decision. This is when S&P made its decision.

Furthermore, Fitch Ratings declared that it was putting "Israel's" A+ foreign- and local-currency issuer default ratings under negative watch due to "conflict-related risks".

According to S&P, the Israeli economy is predicted to decrease by 5% in the fourth quarter of this year compared to the third, with a potential recovery in early 2024.

Read: S&P downgrades US banks credit ratings, shares drop

This results from the drafting of reservists, decreased commercial activity, disturbances connected to security, and other elements like a confidence shock.

In addition to an increase in defense spending, S&P predicted that additional fiscal policies aimed at supporting individuals and companies would result in a larger government deficit.

If the aggression increases "materially", S&P could further cut the entity's ratings, it added.

Read: Wall Street slumps amid interest rate, economic growth concerns

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