International credit rating agencies S&P and Fitch both say that a ceasefire and hostage agreement between Israel and Hamas could mitigate factors behind their negative outlook for Israel’s rating, but significant risks remain. The two agencies thus join Moody’s, which also has a negative outlook on Israel’s credit rating and which issued a similar assessment of the agreement.
Fitch assigned Israel a negative outlook when it cut the country’s sovereign rating from A+ to A in August 2024. S&P did the same when it made a similar downgrade in October.
“A permanent halt to the war in Gaza would reduce the risks captured by the negative outlook on Israel’s sovereign rating and add to the potential for broader mitigation of security risks in the Middle East following recent developments in Lebanon and Syria,” Fitch stated, but added, “However, there remains a high degree of uncertainty about how sustainable any reduction in violence will be, and political risks in Israel could pose challenges to fiscal consolidation.”
“Israel’s medium-term prospects remain subject to a high degree of uncertainty, reflecting risks around military spending plans, coalition priorities and the shape of Israel’s economic recovery.”
For its part, S&P spoke of “implementation risks” to the ceasefire, which is set to extend in phases. “The multi-stage nature of the agreement, amid the complex and volatile political context, will test the ability and willingness of both Israel and Hamas to comply,” S&P states in its update to investors.
“In the coming weeks, we will evaluate whether implementation of the deal can lead to a sustainable ceasefire and reduce the risk of prolonged or intensified military conflicts, which is currently reflected in the negative outlook on our sovereign ratings on Israel,” the agency says.
Religious Zionist Party leader and Finance Minister Bezalel Smotrich, who threatened to pitch his party out of the government over the agreement, said he had received a pledge from Prime Minister Benjamin Netanyahu that the IDF’s campaign in the Gaza Strip would not end until the “full objectives” were achieved.
Published by Globes, Israel Business News – en.globes.co.il – on January 22, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd. , 2025.
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