The Fitch rating agency downgraded Israel’s sovereign credit rating by one notch, from “A+” to “A”, due to the ongoing war with the Palestinian Islamist movement Hamas in the Gaza Strip, which it believes may last until 2025
“The war in Gaza could last until 2025, and there are risks of it expanding to other fronts,” Fitch stated in its report announcing the downgrade.
“Beyond the human toll, it could also lead to additional military expenses, the destruction of infrastructure, and cause long-term damage to economic activity and investments, which would further deteriorate Israel’s credit outlook.”
Fitch added that the country’s fiscal situation has already been impacted, and Israel is expected to record a fiscal deficit this year.
In February, the rating agency Moody’s was the first to downgrade Israel’s credit rating, also by one notch, to “A2” due to the war.
In April, S&P Global followed suit, downgrading Israel’s sovereign credit rating from “AA-” to “A+”, while still maintaining it at a level indicating the country can comfortably repay its debts, citing “increased geopolitical risks.”
Earlier yesterday, France, Germany, and the United Kingdom jointly called for an “immediate” ceasefire between Israel’s armed forces and Hamas in the Gaza Strip.
The countries mediating the indirect negotiations—Qatar, Egypt, and the US—recently called for the resumption of talks on Thursday, August 15, aiming for a ceasefire that would include the release of Israeli hostages in exchange for the release of Palestinian prisoners held in Israeli jails. The Israeli government confirmed yesterday that it would participate.
Hamas, on the other hand, called on mediators to present a “roadmap” for the “implementation” of the proposal put forward by US President Joe Biden, which was approved by a “UN Security Council resolution,” instead of engaging in “more negotiations.”
According to Fitch, the continuation of the war into next year would force Israel to maintain high military spending, causing further harm to sectors such as tourism, construction, and production in border areas.
Israel has vowed to eliminate Hamas, which has been in power in the Gaza Strip since 2007 and is considered a terrorist organization by Israel, the US, and the EU, following its attack on southern Israel on October 7, which resulted in 1,198 deaths, mostly civilians, according to an AFP tally based on official Israeli data.
In the large-scale Israeli military operations launched in retaliation against the besieged Palestinian enclave, at least 39,897 people have been killed so far, according to the latest figures from the Hamas government’s Ministry of Health.
