Standard & Poor’s lowers Israel’s credit rating due to increased geopolitical risks
In a recent move, S&P Global downgraded Israel’s long-term ratings to A-plus from AA-minus following the heightened confrontation with Iran over the weekend, adding to the existing geopolitical risks for the country.
According to a recent statement from S&P Global, they predict that Israel’s general government deficit is expected to increase to 8% of GDP in 2024, primarily due to the rise in defense expenditures.
The pessimistic view underscores the concern that the conflict in Gaza and the tensions with Hezbollah could potentially worsen or have a greater impact on Israel’s economy than what the agency is currently anticipating.
“We currently see several possible military escalation risks, including a more substantial, direct, and sustained military confrontation with Iran,” the statement said.
On Saturday, Iran’s Islamic Revolutionary Guards Corps said it launched dozens of drones and missiles at Israel following Israel’s April 1 attack on an Iranian consulate in Syria.
The US has pledged to back Israel.
S&P’s downgrade was issued shortly before the strike in Iran, and almost three months after Moody’s, another major US credit agency, downgraded Israel’s rating due to the “ongoing military conflict” in the besieged territory.
Earlier this month, Fitch removed Israel from “rating watch negative” and kept its A-plus rating, but cited Israel’s war in Gaza as a risk.
In February, Moody’s downgraded the country’s credit rating on war risks. Far-right Israeli Finance Minister Bezalel Smotrich said that decision was not based on sound economic reasoning and was tantamount to a pessimistic “manifesto”.
S&P typically issues sovereign credit ratings on scheduled dates, but does break with that practice if events merit.
S&P’s will issue another ratings review for the country on the date it was originally scheduled to do so, on May 10.
No Iranian official directly acknowledged the possibility that Israel attacked, and the Israeli forces did not respond to a request for comment.
However, tensions have been high since the Saturday assault on Israel amid its war in the Gaza Strip and its own strikes targeting Iran in Syria .
