« Israel’s sovereign credit rating could be reduced if the war with the Palestinian Islamist group Hamas spreads to other fronts, but if that does not happen, the country should be able to weather the economic fallout from war if he makes the necessary budget changes to offset increased spending, » he added. Director of S&P Global Ratings told Reuters Today.
RELATED ARTICLES
In October, international rating agency S&P affirmed Israel’s sovereign rating AA-, but lowered the rating outlook from « stable » to « negative » due to the outbreak of war, and warned that if as the fighting spreads, it could harm the Israeli economy.
“The negative ratings outlook implies that we currently see at least a one in three chance of a downgrade over the next two years,” Maxim Rybnikov, director of sovereign ratings and public finance EMEA at S&P, told Reuters.
Rybnikov said a downgrade could happen for two main reasons. One of them was the increased geopolitical risk in the event of direct confrontation with Hezbollah in Lebanon or with Iran. The second was Israel’s economic situation after the war. “We may also lower the ratings if the impact of the conflict on Israel’s economic growth, fiscal situation and balance of payments turns out to be greater than we currently anticipate,” Rybnikov said.
S&P currently projects growth of just 0.5% for the Israeli economy in 2024 and an increase in the budget deficit as a share of GDP in 2023-2024 to 10.5%.
“These assumptions carry downside risks,” Rybnikov said. « Given Israel’s other credit characteristics, a temporary deterioration in the fiscal situation can be overcome. However, if…the fiscal situation proves persistently weaker beyond 2024, without compensatory measures, this could erode Israel’s fiscal space. It is already clear that defense spending will be higher in the coming years and the long-term impact of the war on FDI (foreign direct investment) flows, Investor confidence and other areas remain uncertain. “Government net debt without offsetting measures could present risks. This is one of the reasons why the ratings are currently with a negative outlook,” he added to Reuters.
Published by Globes, Israel Business News – fr.globes.co.il – January 29, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
