Moody’s downgrades Israel’s rating for the first time due to the impact of the war in Gaza

The credit rating agency Moody’s announced that it will lower the credit rating of Israelthe first demotion in the country’s history, and also assigned a “negative outlook” to the new rating.

The note for the solvency of the Israeli economy thus went from the maximum of A1 to A2, announced Moody’s in the first downgrade to Israel since its bonds began to be rated by international investment risk assessment agencies about three decades ago.

Moody’s explained that the lowering of the grade was made after “evaluating the current military conflict with Hamasand its broader consequences that materially increase the political risk for Israelweaken their executive and legislative institutions and their fiscal strength, in the near future.”

The budgetary burden implied by the war Loop, the expenditure on weapons, the payment of soldiers, the slowdown in the economy due to the mobilization of more than 360,000 reservists who have had to leave their jobs; have hampered the economic growth of Israel and represent a burden on public finances and debt.

The rating agency also lowered its outlook for the company’s debt. Israel to “negative” due to the “risk of escalation” with the Lebanese group Hezbollahmuch more powerful than Hamas, and which operates along its northern border. “The Israeli economy is strong.

The downgrade has nothing to do with the economy, but is entirely due to the fact that we are at war,” the Israeli Prime Minister defended in a statement. Benjamin Netanyahu after the announcement of Moody’s.

”The rating will go up again the moment we win the warand we will win it,” he predicted.

After the attack of Hamas On October 7, when the war began, the Strandard & Poors agency already lowered Israel’s credit outlook from stable to negative due to the risk of expansion of the conflict; while the other major credit agency, Fitch, put Israel “under negative watch” for the same reason.

The announcement of Moody It came as the coalition government modifies the 2024 budget and adapts it to wartime.

The budget bill for 2024 was already approved in first reading last Wednesday in the plenary session of Parliament, which must vote on it two more times before its approval.

Lawmakers voted 57-50 to approve the additional 584 billion shekel ($159 billion) war spending package.

The Israeli government must increase bond issuance to finance its budget deficit, which jumped to 4.8% of GDP at the end of January 2024 and is expected to reach 6.6% of GDP at the end of 2024.