In a major blow to Israel’s economy, the international rating agency S&P has lowered its sovereign credit rating in foreign currency from AA- to A+, with a negative forecast indicating the possibility of further downgrade in the near future. This reduction was expected as Israel’s rating was higher than those of other agencies, with Moody’s having already downgraded it and Fitch changing its outlook to negative.
The main reasons cited by S&P for the rating downgrade are a significant deterioration in the geopolitical situation and an increase in the state budget deficit. The agency is projecting a deficit of 8%, which is higher than the 6.6% initially budgeted. Additionally, S&P forecasts that Israel’s public debt to GDP ratio will reach 66% by 2026.
These developments highlight the challenges facing Israel’s economy and the need for prudent fiscal management to stabilize its credit rating and address its growing debt levels. It is crucial for the government to implement effective measures to improve its fiscal position and boost economic growth in order to regain the confidence of international investors and rating agencies. Failure to do so could result in further downgrades and increased borrowing costs, which could have serious implications for Israel’s future economic stability.