Fitch lowers Israel’s credit rating from A+ to A, warning war could last well into 2025

The Fitch credit rating agency has lowered Israel’s credit rating from an A+ to an A and says its outlook for the country’s economy is “Negative” as the war in Gaza could drag well into 2025 and threatens to spread to additional fronts.

“The downgrade to ‘A’ reflects the impact of the continuation of the war in Gaza, heightened geopolitical risks and military operations on multiple fronts,” the agency says in a press release.

“Public finances have been hit and we project a budget deficit of 7.8% of GDP in 2024 and debt to remain above to 70% of GDP in the medium term. In addition, World Bank Governance Indicators are likely to deteriorate, weighing on Israel’s credit profile,” Fitch Ratings says.

Explaining the “Negative” outlook, the agency says, “In our view, the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts. In addition to human losses, it could result in significant additional military spending, destruction of infrastructure and more sustained damage to economic activity and investment, leading to a further deterioration of Israel’s credit metrics.”

Other factors driving the downgrade are the country’s “political fractiousness, coalition politics and military imperatives” that are putting new fiscal consolidation measures at risk, Fitch says.

Fitch is the third major credit agency to lower Israel’s credit rating, following S&P and Moody’s.

In April, Fitch removed Israel from “credit rating negative” and affirmed the country’s A+ credit rating — but with a negative outlook, citing uncertainty about the duration and magnitude of the war with the Hamas terror group and its toll on the government’s debt burden.