Moody's downgrades Israel's rating

International rating agency Moody's has downgraded Israel's long-term foreign and local currency issuer ratings from A2 to Baa1 with a negative outlook, Report informs via TASS. This marks the second time in 2024 that Israel's rating has been cut, following a downgrade from A1 to A2 in February.

The downgrade comes amidst a significant escalation in the conflict between Israel and the Lebanese militant group Hezbollah.

Moody's cites the intensification of the conflict in recent days as a key factor in their decision, stating that geopolitical risks have risen to very high levels, with material negative consequences for Israel's creditworthiness in both the short and long term.

Israel's stated goal of returning 60,000 evacuated residents from the northern regions to their homes implies more active combat operations, further contributing to the heightened risks. Additionally, Moody's highlights that the chances of reaching a ceasefire agreement in the Gaza Strip have diminished, while domestic political and geopolitical risks have increased significantly.

While the probability of a large-scale conflict between Israel and Iran remains low, Moody's notes that it cannot be ruled out entirely.

The agency expects that due to military actions, Israel's GDP growth will be only 0.5% by the end of 2024. The GDP growth forecast for 2025 has been lowered from 4% to 1.5%.

Moody's has downgraded Israel's rating for the second time in 2024: in February, it was reduced from A1 to A2.