S&P Global Ratings announced last night that it is lowering Israel’s credit outlook from stable to negative. The credit rating itself remains unchanged at AA-.
S&P unexpectedly brought forward the announcement of the credit outlook and rating, which had been scheduled for another two weeks. The downward revision in Israel’s credit outlook follows announcements last week by rival ratings agencies Moody’s and Fitch that Israel was being placed on review for a downgrade.
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S&P said that the war will make it difficult for the Israeli economy and will widen the fiscal deficit although the economy can be expected to grow again after the war. This scenario assumes that the war remains mainly on the Gaza front. But S&P also cites a more negative scenario, in which the war spreads to other fronts and this could lead to a cut in Israel’s credit rating itself in the agency’s next announcement in six months.
In the first and main scenario, S&P already sees Israel’s economy returning to its pre-war level of growth in the first quarter of 2024. The current growth predictions are lower in the medium term, ‘compensated’ by higher growth in the longer term. S&P sees 1.5% growth in 2023, 0.5% in 2024, and 5% in 2025, after confidence has been restored, rehabilitation and a rise in investment income.
S&P expects the fiscal deficit to wide in 2023-2024 following government measures to support the economy and businesses. S&P sees a fiscal deficit of 5.3% of GDP in 2023-2024, up from 2.3% in its previous forecast.
Published by Globes, Israel business news – en.globes.co.il – on October 25, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.
