International credit rating company announced it’s set to lower Israel’s credit rating for the second time in a year alongside a stern report to be filed close to 11 p.m. local time detailing the expansion of fighting on the northern border and severe worries for an economic crisis in Israel. The company has already lowered Israel’s credit score in February and set it to A2.
The credit rating downgrade was finalized and could not be prevented, despite recent efforts by the Prime Minister's Office and the Finance Ministry to convince Moody's economists the Israeli government is working to drastically reduce the country’s deficit to 4%. The firm, however, believes the move isn’t feasible given the expansion of the war and the massive expenditures associated with it.
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Finanace Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu
(Photo: Amit Shabi)
This will mark the second time that Moody's has downgraded Israel's credit rating. The firm was the first ever to lower Israel's rating, assigning it an A2 rating which has been in place since international rating agencies began rating Israel in 1998. In April, Standard & Poor's downgraded Israel's rating to A+, and Fitch Ratings lowered its rating from A+ to A just over a month ago.
In the report to be published Friday, following the close of trading on the U.S. stock exchange, economists from Moody's — the world's second-largest rating agency — said the widespread war Israel is fighting on two fronts is causing enormous budgetary expenses, significantly impacting the economy due to the shutdown of parts of it, particularly along the northern border among the extensive reservist call-up in the country. The government will need to take large loans domestically and internationally, according to the firm.
The report is set to criticize the government for its delayed response in taking significant measures to reduce the country’s deficit and manage the wartime economy as needed.
However, it noted that the government is expected to approve, the 2025 state budget by the end of the year, which will likely include several significant steps to reduce the deficit both on the expenditure side via budget cuts and the revenue side via tax hikes.
The report expressed concern over the damage to the Israeli economy should the war expand further and continue for a long period. It was also reported the world's largest rating agency, Standard & Poor's, won’t publish its periodic report ahead of schedule and is expected to be released in November. Standard & Poor's is also expected to lower Israel's credit rating for the second time in less than two months.