Late Friday, credit ratings agency Moody's issued an update on Israel, leaving the Israeli government's foreign and local currency ratings and negative outlooks unchanged, with a negative outlook.
In its reasons for its negative rating outlook, Moody's says: “The risk of escalation into an outright military conflict between Israel and Iran remains, which could lead to material human and economic costs. Israel's conflict with Hamas in Gaza is ongoing and of continued length.” The outcome remains highly uncertain.” The agency adds, “The consequences of the Gaza conflict on Israel’s credit standing will unfold over a period of time, likely extending beyond the period of actual fighting. The negative impact on the country's institutions and public finances may be more serious than Moody's current expectations.
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However, Moody's maintained Israel's current rating at A2, saying that “the rating affirmation reflects Moody's view that the current A2 rating adequately captures Israel's high exposure to geopolitical risks. Moody's' base scenario involves continued conflict between Israel and Hamas and hostilities between Israel and Israel.” And Iran.” and Iran's proxies, particularly Hezbollah. Under these assumptions, Israel's key credit metrics, including the economy and public finances, develop as expected at the time of the downgrade to A2 on February 9, 2024.
On the positive side, Moody's indicates a recovery in the technology sector in Israel in the first quarter of this year. “The high-tech sector recovered strongly in the first quarter of 2024, with investments reaching $1.74 billion, similar to the first quarter of 2023, and there are no signs of a decline in foreign investor interest or exit from Israel. While growth is likely to be “GDP is very weak this year – Moody's expects real GDP growth of just 0.6% for 2024 as a whole – and assuming hostilities end sometime this year, it is likely to recover in 2025, similar to previous episodes of conflict.”
Three weeks ago, Standard & Poor's lowered its rating on Israel from AA- to A+, with a negative outlook. Moody's rating is currently one notch below Standard & Poor's. In its latest review, the third international rating agency, Fitch, lowered its forecasts, but left its actual rating at A+, one notch higher than Moody's.
Published by Globes, Israel Business News – en.globes.co.il – on May 12, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.