Israel’s war with Hamas continues to batter its public finances, with the country’s sovereign debt rating cut a notch from “A+” to “A” by Fitch Ratings.
The agency retained a negative outlook on the credit, signaling it could cut the rating further in the future.
As the firm listed the rating drivers, such as heightened geopolitical risks amid ongoing military operations, it voiced the opinion that the conflict in Gaza “could last well into 2025,” and cited “risks of it broadening to other 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,” Fitch said in a statement on August 12.
The rating agency went on to cite Israel’s projected budget deficit of 7.8% of GDP in 2024, and a debt set to “remain above 70% of GDP in the medium term.” Credit metrics were seen as likely to deteriorate as a result of hiked up military spending, destruction of infrastructure, and further damage to economic activity and investment.
Back in February, Moody’s Ratings gave Israel it’s first-ever sovereign downgrade. At the time, it cut its credit rating by one notch to A2 with a negative outlook. In response, an overly-optimistic Prime Minister Benjamin Netanyahu assured that Israel’s credit rating would “go back up the moment we win the war – and we will win the war.”
However, scrolling forward to the present day, we see that Israel is continuing to wage the war in the Gaza Strip, which has killed tens of thousands since October 2023. The killings of Hamas political leader Ismail Haniyeh and Hezbollah commander Fuad Shukr have further ignited tensions, with Hamas and Iran blaming Israel for the assassinations and vowing retaliation. Israel's ally the US has not only failed to put out the flames, but has further stocked the Middle East with deadly military equipment.
The Palestinian Hamas movement turned down an invitation from the US, Qatar, and Egypt to participate in a final round of talks with Israel on a ceasefire in the Gaza Strip, scheduled for August 15, it was reported, citing new conditions recently presented by Israeli Prime Minister Benjamin Netanyahu, the assassination of Hamas political leader Ismail Haniyeh, and Israel's latest strikes on the Gaza Strip as reasons for its decision.