Moody's downgrades Israel's credit rating again as war costs rise

Moody’s Ratings has downgraded Israel for the second time this year, reducing its rating from A2 to Baa1. This change reflects increased geopolitical risks and the economic impact of ongoing conflicts with Hamas and Hezbollah, leaving Israel three steps above non-investment grade. The Israeli economy is facing significant challenges, with soaring government spending and a projected budget deficit of 8.3% of GDP. Moody’s expressed doubts about a quick economic recovery, citing long-term damage from the military conflicts. In response, Israeli officials criticized the downgrade as excessive. They noted that while the war has economic costs, the rating does not align with current fiscal data. The finance ministry has also revised its economic growth projections downward for 2024.