International rating agency Moody's downgraded Israel's long-term foreign and local currency ratings from A2 to Baa1 with negative outlook. As stated in a statement on the agency's website, this happened due to the escalation of the conflict with the Lebanese Shiite movement Hezbollah.
„The key factor behind the downgrade is our assessment that geopolitical risks have further strengthened to very high levels, resulting in material negative implications for Israel's creditworthiness in both the short and long term. The intensity of the conflict between Israel and Hezbollah has increased significantly in recent days”, the forecast notes.
As noted by the agency, the stated goal of the Israeli leadership to return to their homes 60 thousand residents of the country, evacuated from the northern regions, includes conducting more active military actions. At the same time, Moody's emphasizes that the chances of reaching a cease-fire agreement in the Gaza Strip have decreased, and domestic political and geopolitical risks have increased significantly. According to the forecast, the probability of a large-scale conflict between Israel and Iran remains low, but not yet ruled out.
The agency expects that by the end of 2024, real GDP growth in Israel due to military operations will be only 0.5%. The forecast for 2025 was reduced from 4% to 1.5%.
Moody's has downgraded Israel for the second time in 2024: it was downgraded from A1 to A2 in February.