S&P Lowers Israel's Credit Rating from A+ to A with Negative Outlook Amid Geopolitical Tensions

In a significant financial move, S&P Global Ratings announced on Wednesday night that it has downgraded Israel's credit rating from A+ to A, now accompanied by a negative outlook. This change suggests that further downgrades could occur in the near future.

The decision to lower Israel's credit rating comes earlier than the scheduled update set for November. It follows a recent downgrade by Moody's, which lowered Israel's rating from A2 to Baa1 (BBB+) with a negative outlook. S&P’s decision was made outside the usual quorum, reflecting concerns over escalating geopolitical tensions.

Government Response and Economic Outlook

Yehli Rotenberg, Israel's General Accountant, stated that S&P's downgrade is a response to the ongoing war and the increased geopolitical risks affecting fiscal data and economic performance. Despite the downgrade, S&P noted the resilience of Israel's diversified economy, highlighting its ability to recover from crises. The country maintains a strong balance of payments, significant current account surplus, and high foreign exchange reserves.

Rotenberg emphasized the importance of stabilizing the economy, urging for the swift approval of the 2025 state budget. This budget aims to rebuild fiscal reserves while maintaining a maximum deficit of 4% of GDP, encouraging investments in growth and addressing social needs.

Implications of Geopolitical Risks

The increase in geopolitical risks has raised concerns about Israel's creditworthiness, with both S&P and Moody's indicating that these factors could negatively impact the country's capacity to meet credit obligations in the short and long term.

As tensions rise in the region, Israeli officials are urged to take decisive actions to restore investor confidence and ensure economic stability.