S&P Global Ratings downgrades the Jewish state’s debt rating

The rating agency S&P Global Ratings lowered Israel’s debt rating from AA- to A+ on Thursday, April 18 due to “the intensification of the confrontation with Iran” and gave it a negative outlook, signaling a possible further deterioration in the coming months. “The recent intensification of the confrontation with Iran increases the already high geopolitical risks for Israel”said the agency’s press release. “We believe that a broader regional conflict will be avoided, but the war between Israel and Hamas and the confrontation with Hezbollah appear likely to continue into 2024.”warns S&P Global Ratings.

A projected deficit of 8% of GDP in 2024

This is the second time Israel has faced a reduction in its long-term debt. In February, Moody’s also cut interest rates by one step due to the conflict with Hamas. The war caused by an October 7 attack by the Palestinian Islamist movement on Israeli territory has no reprieve. “We previously thought that the military activity would not last longer than six months”acknowledges S&P.

The agency predicts an increase in the country’s government deficit, which will represent 8% of Israel’s GDP this year, due to the increase in defense spending. In the medium term, deficits will still be higher and government debt will peak at 66% of GDP in 2026, S&P further indicates.

This downgrade of the sovereign debt rating follows “the geopolitical risks Israel faces after the first direct attack by Iran in mid-April”says the press release, recalling that this attack took place after the attack on the Iranian consulate in Damascus attributed to Israel.