Credit ratings agency Moody’s on Friday concluded its review of Israel and downgraded the country to “A2” from “A1”, citing material political and fiscal risks for the country due to its war with the Palestinian terrorist group Hamas.
“While fighting in Gaza may diminish in intensity or pause, there is currently no agreement to end the hostilities durably and no agreement on a longer-term plan that would fully restore and eventually strengthen security for Israel,” Moody’s said in a statement.
Moody’s said in a statement that the credit rating drop came following an assessment of Israel’s current climate. “The ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” the statement said.
The agency also mentions the looming threat of escalation with Hamas along the Israel-Lebanon border.
Israeli forces geared up on Friday for a ground assault on Hamas in the southern Gaza city of Rafah, where hundreds of thousands of people displaced by violence further north are trapped in desperate conditions.
Moody’s sent a warning to Israel shortly after the October 7 massacres, just days before a scheduled rating review that a prolonged war with Hamas could drag down the country’s credit score.
Prime Minister Benjamin Netanyahu issued a rare statement over Shabbat in the early morning hours of Saturday morning.
“The Israeli economy is strong. The rating downgrade is not connected to the economy, it is entirely due to the fact that we are in a war,” the PM said in his statement.
October 7 massacre leaves nation, and economy, in distress
Surprise attacks by Hamas had sparked the worst escalation in violence in 50 years and raised questions about not just the humanitarian cost, but the economic toll as well.
Moody’s, which was scheduled to review Israel’s “A1 stable” rating, said the chances of a downgrade would depend on how the war develops.
The Israeli political scale had been threatening Israel’s credit rating score for months, previously citing Netanyahu’s government and reforms.
