Israel-Hamas war: S&P downgrades Israel's credit outlook to negative

Israel's credit outlook has been downgraded to negative by S&P Global Ratings, a decision attributed to the ongoing conflict with Hamas.

According to a report by Bloomberg, S&P's credit assessment affirmed Israel's rating at AA-, the fourth-highest level, but expressed concerns that the war could potentially have a broader and more significant impact on Israel's economy than initially expected.

This move follows similar actions by Moody's Investors Service and Fitch Ratings, which placed Israel's debt rating under review for a downgrade and its credit score on negative watch, respectively. Both agencies called the ongoing conflict a reason for concern.

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Bloomberg quoted S&P's analysts, Maxim Rybnikov and Karen Vartapetov, as stating, "The Israel-Hamas war could spread more widely or affect Israel's credit metrics more negatively than we expect." The agency's current assumption is that the conflict will remain primarily centered in Gaza and last no more than three to six months.

S&Pnow anticipates a 5 per cent economic contraction in the fourth quarter, up from their previous projection three months ago. This contraction is attributed to security-related disruptions and reduced business activity. Moreover, the mobilisation of reservists, the suspension of foreign tourism, and a broader loss of economic confidence are expected to weigh on growth in the final months of 2023.

(With inputs from Bloomberg)

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