Moody’s downgrades Israel’s credit rating for the first time in its history

For the first time in its 75-year history, Israel receives the news that the credit agency Moody’s has lowered its credit rating from A1 to A2, with a “negative” outlook. This decision is based on the instability generated by the four months of fighting in the war against Hamas. Additionally, there are concerns about a possible larger scale expansion in the north against Hezbollah militias in Lebanon.

The negative outlook weakens the Israeli economy and the government. Prime Minister Benjamin Netanyahu has quickly responded, claiming that the economy, led by Finance Minister Bezalel Smotrich, bears no relation to this assessment. Netanyahu argues that the downgrade is due to the current war situation and promises that once the conflict is over, the rating will recover.

The war is already impacting Israel’s economy, with the decline in tourism and the closure of businesses affected by the attacks on October 7.

Minister Smotrich describes the rating downgrade as a “baseless political” decision and maintains that the Israeli economy is stronger and more solid than ever, despite the conflict with Hamas.

The first downgrade of Israel’s credit rating worries investors, fearing that the government will be hit by almost unprecedented borrowing to finance the war.