Fitch downgrades Israel's credit rating.

The international credit rating agency Fitch Ratings has downgraded Israel's credit rating due to the ongoing war in Gaza.

In a statement, Fitch announced that Israel's credit rating has been lowered from "A+" to "A" with a negative outlook. The statement highlighted that the downgrade reflects the impact of the ongoing conflict in Gaza, increased geopolitical risks, and military operations on multiple fronts, indicating that Israel's public finances have been affected.

"GEOPOLITICAL RISKS SUPPORT THE COUNTRY'S NEGATIVE OUTLOOK"

The statement also mentioned that this year Israel is projected to have a budget deficit of 7.8% of its gross domestic product (GDP) and that the debt is expected to remain above 70% of GDP in the medium term. It emphasized that geopolitical risks further support the country's negative outlook, stating that the conflict in Gaza could continue until 2025 and there are risks of spreading to other fronts.

The statement highlighted that in addition to human casualties, the conflict could cause significant additional military expenditures, infrastructure destruction, and prolonged damage to economic activity and investment, potentially worsening Israel's credit metrics.

"THERE IS A RISK OF CONTINUED INTENSIVE OPERATIONS"

The statement reminded that tensions between Israel and Iran and its allies remain high, and recent attacks underscore the escalation risk that could further harm Israel's credit profile. It indicated that the war is likely to continue until the end of 2024 and there is a risk of continued intensive operations, which would mean ongoing high expenditures for urgent military needs and disruptions in production, tourism, and construction in border areas.

The statement from Fitch noted that the prolongation or escalation of conflicts with significant and long-term impacts on the economy and public finances could lead to a further downgrade in the credit rating.