Fitch Downgrades Israel’s Debt Rating Amid Gaza Conflict

Fitch predicts that if the conflict extends into 2025, Israel will need to maintain high military spending, leading to further disruptions in sectors like tourism, which could have long-term economic impacts.

Israel’s Debt Downgraded by Fitch Amid Unprecedented Tensions

In an atmosphere of unprecedented tensions, Fitch Ratings on Monday downgraded Israel’s debt rating to “A” with a negative outlook, indicating the potential for further downgrades in the coming months.

Economic Fallout from the Conflict with Hamas

The ongoing conflict with Hamas is a primary reason cited by Fitch for the downgrade. Beyond the human toll and potential for significant military spending, the agency fears lasting impacts on Israel’s economic situation.

According to Fitch, the conflict “could persist until 2025” and may lead to serious economic repercussions, such as infrastructure destruction and damage to economic activities, which would in turn worsen the country’s credit outlook.

A Strained Financial Situation for Israel

Israel’s public finances have already been significantly affected. Fitch estimates that Israel’s budget deficit could reach 7.8% of GDP, with debt exceeding 70% of GDP. These figures could continue to climb if the conflict extends.

Reactions and Planned Measures

Israeli Finance Minister Bezalel Smotrich has downplayed Fitch’s decision, stating that such a downgrade was anticipated following wars and geopolitical risks. However, he remains optimistic, asserting that the Israeli economy will rebound through “responsible” budgetary measures to be implemented soon.

In this particularly uncertain and tense environment, France, Germany, and the United Kingdom have called for an immediate truce between Israel and Hamas.

Following earlier downgrades by Moody’s and S&P Global, Fitch’s announcement highlights the “increased geopolitical risks” in a region that continuously experiences crises.