The Israeli Government’s credit rating has been downgraded by Moody’s, citing the ongoing Gaza War. Israel’s prolonged war has mobilized many reservists, who would otherwise be at work growing the Israeli economy.
A lower credit rating would mean higher interest rates for Israel and its companies to borrow funds on the world market. The Israeli finance minister shot back, claiming that the move was politically motivated and not based on economic fundamentals. AP News says:
Israel’s finance minister on Sunday slammed the decision by financial ratings agency Moody’s to downgrade Israel’s credit rating, saying the announcement is a “political manifesto” that “did not include serious economic claims.”
Moody’s dropped the rating on Israel’s debt on Friday, warning that the ongoing war in Gaza and a possible war in the north with Hezbollah could adversely affect Israel’s economy.
Another credit agency, Standard & Poor, will be updating Israel’s score in May. When the war first started, the company expressed optimism that Israel’s modern economy could weather the storm. A widening regional conflict could throw a wrench in these plans, making Israel’s position more fragile. The NY Times continues:
S&P, which has also been re-evaluating Israel’s credit rating since October, has planned an update to the country’s credit rating for May 10. The rating agency noted in a report in November that Israel’s diversified economy and strong tech sector should give its finances ballast during the war, though it warned that a further escalation of the conflict to regions outside Gaza could strongly affect its decision-making.
“We could lower the ratings on Israel if the conflict widens materially, increasing the security and geopolitical risks that Israel faces,” S&P’s analysts noted. “We could also lower the ratings in the next 12-24 months if the impact of the conflict on Israel’s economic growth, fiscal position and balance of payments proves more significant than we currently project.”
Israel’s end goal in Gaza is not clear, and many in the US Government are calling for it to the end the war. Israel currently occupies close to half of Gaza, and Netanyahu has previously stated that he does not want to relinquish occupational duties to Palestinians.
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