There is a feeling of relief at the Ministry of Finance after international ratings agency Fitch announced today that it is keeping Israel's high A+ rating unchanged and removed Israel from the rating watch negative list. However, Fitch has cut Israel's outlook from stable to negative.
Prior to Fitch's announcement, analysts had predicted a 60%-70% likelihood of Israel's rating being cut. Israel's accountant general Yali Rothenberg recently met with Fitch representatives in London in efforts to prevent a rating cut.
In explaining its decision Fitch said, "Geopolitical risks associated with the war in Gaza remain elevated and escalation risks remain present, but Fitch believes the risks to the credit profile have broadened and their impact may take longer to assess, so has removed the RWN on Israel's 'A+' rating."
But on the cut to a negative outlook Fitch said, "This reflects the combination of uncertainties around the fiscal trajectory and the war's duration and intensity, including the risk of regional escalation. We expect a near-term jump in debt/GDP and persistently higher military spending in the context of fractious domestic politics and uncertain macroeconomic prospects, which could limit Israel's ability to bring down debt in the future."
Minister of Finance Bezalel Smotrich said, "Keeping the rating at A+ during wartime represents a vote of confidence in the Israeli economy and the economic policy that we are leading."
Published by Globes, Israel business news - en.globes.co.il - on April 2, 2024.
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