Fitch says Israel’s credit rating remains on negative outlook due to ‘prolonged political uncertainty’

Fitch says Israel’s “A” credit rating remains on negative outlook, warning that the country faces a “heightened risk of prolonged political uncertainty and a period of caretaker government” after this week’s national election.

The rating agency notes that Israel’s “fractious” domestic political environment and the “risk of a no-majority government” are consistent with the country’s current rating.

“We believe there is a risk that a stable coalition with a 61-seat majority will not emerge,” Fitch says. “A dissolution in early January and fresh elections in early April is the most likely scenario, in our view.”

“We expect government debt/GDP to continue rising modestly, which remains one of the main drivers of Israel’s Negative Outlook,” the rating agency cautions.

Fitch’s negative outlook on Israel’s rating means the country could face a downgrade. A lower rating raises credit costs for the government, businesses, and households.