Moody’s Investors Service downgraded Israel’s credit rating on Friday, from A1 to A2, and lowered the debt outlook due to the impact of the ongoing war with Hamas in Gaza and the risk of a wider conflict with the Lebanese terror group Hezbollah.
The new A2 rating is still the third highest given by Moody’s, considered “Rated as high quality and very low credit risk,” but the downgrade may have political implications if it becomes more expensive for the government to borrow money.
Israeli Prime Minister Benjamin Netanyahu downplayed Moody’s decision, stating “The Israeli economy is strong. The downgrade is not related to the economy, it is entirely due to the fact that we are at war.”
“The rating will go back up as soon as we win the war – and we will,” Netanyahu concluded in a rare Friday night statement.
The international U.S.-based agency, Moody’s Investors Service, described its decision in a statement, “The ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future.”
Alongside the credit rating moving downward, Israel’s debt outlook was also listed as “negative” in part due to the “risk of escalation” with the Lebanese terrorist organization Hezbollah, with skirmishes reportedly already weighing heavily on Lebanon’s economy.
The announcement also said it expected Israel’s debt burden to be “materially higher” than expected before the conflict, and came as the Israeli parliament was working to pass an amended wartime budget for 2024.
Following the Hamas-led October 7 attack, the two other Big Three agencies S&P Global Ratings and Fitch downgraded Israel’s credit outlook from stable to negative due to the risk of a widening conflict.
