S&P joins Moody's in downgrading Israel credit rating
The downgrade came after Israel escalated its war on Lebanon and was determined even before Iran's massive retaliatory missile barrage on Israel Tuesday night
Global credit rating agency S&P abruptly downgraded Israel's credit rating from A+ to A on 2 October following Israel's escalation of its war on Lebanon in recent weeks, warning that it could lead to a prolonged and intense conflict.
The S&P had not been scheduled to release its updated report on Israel's credit rating for another five weeks.
“The unscheduled announcement was due to the significant rise in Israel's geopolitical and security risks,” the report stated.
The downgrade was announced early Wednesday but was decided even before Iran's unprecedented retaliatory attack on Israel Tuesday night. Iranian forces launched some 180 ballistic missiles at three separate Israeli airbases as Israel's Iron Dome missile defense system struggled to intercept.
S&P warned that Israel's wars on Gaza and Lebanon, including a possible ground operation in Lebanon, could last into 2025.
Fears of retaliation from Iran and Hezbollah caused the agency to lower its economic growth forecast for Israel, predicting zero percent growth in 2024 and 2.2 percent in 2025.
The agency also forecast a fiscal deficit of nine percent of GDP for this year and six percent for next year. The Israeli Finance Ministry's target is six percent.
Another major rating agency, Moody's, downgraded Israel's credit rating by two levels on 27 September, saying “geopolitical risk has intensified significantly” amid Israel's recent escalation of its war on Lebanon and its ongoing war on Gaza.
The downgrade dropped Israel's rating at Moody's from the A2 level to the relatively low Baa1 level, shared by countries like Spain, Bulgaria, Peru, Kazakhstan, and Thailand.
“The ratings would likely be downgraded further, potentially by multiple notches, if the current heightened tensions with Hezbollah turned into a full-scale conflict,” the agency added.