International credit rating agency S&P released a review of the Israeli economy this morning (Tuesday) that does not include a rating action. The review discusses Israel’s political situation in detail, and raises the agency’s growth forecast for the Israeli economy to 5.5% for the current year and 7% for next year, primarily thanks to the impact of Nvidia’s activities on the Israeli economy.
The agency assesses that security risks will remain high, and that there is a risk of another round of hostilities between Israel and Iran. It expects that uncertainty in the Middle East will persist, and that the conflict will continue into 2027.
S&P assumes that, as in Operation Roaring Lion in February-March this year, should another round of conflict with Iran erupt, the scale of the engagement and the damage to infrastructure in Israel will be limited. The review also notes the active fronts in Lebanon and Gaza. Risks to Israel's credit rating include a deterioration in the country's economic and budgetary performance resulting from a military escalation. A positive scenario for the rating would involve economic and fiscal indicators improving beyond current expectations, or a reduction in geopolitical risks.
The agency also addresses the results of the elections in Israel, in which neither political bloc gained a majority in the Knesset. In the agency's view, a change in government could affect Israel’s diplomatic approach; the opposition might prioritize strengthening state institutions, show greater openness to diplomatic initiatives, and place a stronger emphasis on relations with Israel's allies, but it assesses that both sides of the political divide in Israel hold similar views on security matters.
The agency anticipates that economic growth will remain robust, but that fiscal pressure will persist, driven by high defense expenditures.
The agency’s upward revision of its growth projections stems partly from the increased contribution of overseas production by multinational technology companies registered in Israel, such as Mellanox (acquired by Nvidia in 2020), and intellectual property developed in Israel but sold globally. The Central Bureau of Statistics has presented two separate GDP series: one that includes production abroad, and one that excludes it. According to the agency, this is similar to the practice in Ireland, where the activities of global technology companies also inflate GDP. However, the agency notes a key distinction: while the distortion in Ireland is driven primarily by foreign multinational corporations, the situation in Israel reflects an increase in production abroad linked to technology and intellectual property developed within Israel. Consequently, the agency has decided to base its growth forecast for Israel on the overall (inclusive) figure.
Last year, the government’s debt-to-GDP ratio was 68.5%. The agency forecasts that the ratio will fall to 65.2% by 2029. Before the war, S&P estimated that it would reach 55% by that time. Despite the rise in the debt-to-GDP ratio, the agency points out that the composition of Israel’s debt is favorable, as the majority is held domestically and denominated in local currency.
S&P commends the Bank of Israel for its flexible monetary management, noting that inflation has moderated despite higher energy prices. It expects inflation to remain within the 1-3% target range.
Rival rating agency Moody's also lifted its growth forecast for Israel recently, to 5% in 2026 and 6% in 2027.
Published by Globes, Israel business news - en.globes.co.il - on November 10, 2026.
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