International credit rating agencies S&P and Fitch Ratings both say that the ceasefire and hostage release agreement between Israel and Hamas could alleviate the factors behind their negative outlooks for Israel’s rating, but that considerable risks remain. The two agencies thus join Moody’s, which also has a negative outlook for Israel’s credit rating and which issued a similar assessment of the agreement.
Fitch assigned Israel a negative outlook when it downgraded 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 durable cessation of the war in Gaza would reduce risks captured by the Negative Outlook on Israel’s ‘A’ sovereign rating and add to the potential for a broader easing of security risks in the Middle East following recent developments in Lebanon and Syria," Fitch stated, but added, "Nonetheless, there is still a high degree of uncertainty over how sustainable any reduction in violence will be, and political risks in Israel could pose challenges to fiscal consolidation."
"Israel’s medium-term fiscal prospects are still subject to a high degree of uncertainty, reflecting risks around military spending plans, coalition priorities and the shape of Israel’s economic recovery," Fitch’s update states.
For its part, S&P talks of "implementation risks" to the ceasefire, which is due to proceed in stages. "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. We also understand there are disagreements within Israel’s government and among Hamas’ leaders on acceptable concessions," S&P states in its update to investors.
"In the coming weeks, we will assess whether the deal’s implementation can result in a sustainable ceasefire and reduce the risk of protracted or intensified military conflicts, which are currently reflected in the negative outlook on our sovereign ratings on Israel," the agency states.
Religious Zionist party leader and Minister of Finance Bezalel Smotrich, who threatened to lead his party out of the government over the agreement, has said that he received a pledge from Prime Minister Benjamin Netanyahu that the IDF campaign in the Gaza Strip will not end until its "full goals" have been achieved.
Published by Globes, Israel business news - en.globes.co.il - on January 22, 2025.
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