Israel credit outlook lowered, budget to be amended amid Hamas war

Adam Lucente

Oct 25, 2023

Israel's far-right Finance Minister Bezalel Smotrich delivers a speech during a rally in the outpost of Eviatar, south of Nablus in the occupied West Bank, on April 10, 2023. — GIL COHEN-MAGEN/AFP via Getty Images

A major credit rating agency downgraded Israel’s outlook and a government minister said the current budget will need to be amended this week as the war with Hamas continues to affect Israel’s economic situation.

S&P Global Ratings affirmed Israel’s AA- rating for foreign and local currency on Tuesday, indicating a “very strong capacity” to meet its financial commitments. However, the New York-based agency revised Israel’s outlook from stable to negative, according to a press release, meaning that S&P could downgrade Israel’s credit rating in the future.

The firm cited risks related to the Gaza war, specifically that the conflict “could spread more widely with a more pronounced impact on the economy and security situation in Israel.” Relatedly, S&P Global projected the Israeli economy to contract by 5% in the fourth quarter of 2023 due to security-related disruptions to businesses, a decline in foreign tourism and a “broader confidence shock," before rebounding in early 2024.

S&P further predicted that increased government spending in relation to the war will increase the government deficit to 5.3% of GDP into 2024, up from the previous prediction of 2.3%, according to the release.