Faced with the risk of escalation in the Middle East, the S&P rating agency lowered Israel's rating on its sovereign debt from AA- to A+.
“The recent intensification of the confrontation with Iran increases the already high geopolitical risks
,” writes S&P, while Israel has been at war with Hamas since the October 7 attacks.
The move came before US media revealed an alleged response from Tel Aviv in central Iran. The Israeli government has refused to confirm having targeted an air base near Isfahan, in retaliation for 350 Iranian missile and drone attacks last Saturday on its territory. The agency, which assesses the capacity of borrowing states, forecasts that Israel's public deficit will reach 8% of GDP in 2024, due to increased defense spending.
Higher deficits will also persist in the medium term, and we expect net government debt to peak at 66% of GDP in 2026
The S&P rating agency
“Higher deficits will also persist in the medium term, and we expect net general government debt to peak at 66% of GDP in 2026
,” it says. A broader conflict would affect the security of the Jewish state “and therefore its economic, fiscal and balance of payments parameters.” This is the second time that Israel has experienced a downgrade of its long-term debt rating. In February, Moody's lowered it by one notch, due to the conflict with Hamas, to A2 with a negative outlook.