Moody's downgrades Israel's credit rating due to increased geopolitical risks

International rating agency Moody's has downgraded Israel's credit rating by two notches, from A2 to Baa1, and has assigned a negative outlook for the country.

The primary reason for this downgrade is a significant increase in geopolitical risk, which carries negative implications for Israel's creditworthiness in both the short and long term, Caliber.Az reports citing Moody's.

The agency pointed out that the likelihood of a ceasefire in the Gaza Strip has decreased, while domestic political risks have intensified alongside geopolitical uncertainties.

Moody's assessment suggests that, in the long term, Israel's economy will be more adversely affected by the ongoing military conflict than previously expected. The agency noted that with growing security risks, the economy is no longer projected to recover quickly and robustly, as it has in prior conflicts.

A delayed and slower economic recovery is anticipated to have longer-lasting effects on the country’s public finances, Moody's indicated. The continued negative outlook further reflects the agency's view that downside risks remain, heightening concerns about Israel's financial stability.

In October 2023, Moody's placed Israel's A1 sovereign credit rating under review, signalling the potential for a downgrade. Earlier this year, in February, Moody's had already lowered the country's credit rating from A1 to A2 and revised the rating outlook to negative.

By Tamilla Hasanova