(Washington) Rating agencies Moody’s and Fitch have put Israel’s long-term debt rating – currently at A1 – under review for possible downgrade following the outbreak of war with Hamas.
Moody’s announced this review Thursday in a press release, two days after the decision of the Fitch agency in London which had also placed under negative watch the rating of Israel’s debt, long and short term in foreign and local currencies.
As a factor in a possible downgrade of this rating, Fitch cited on Tuesday “the increased risk of a widening of the current conflict in Israel which could include large-scale military clashes with multiple actors, over a prolonged period.”
The agency mentioned “Hezbollah, other regional militant groups and Iran”.
For Moody’s also, the review “was triggered by the unexpected and violent conflict between Israel and Hamas,” the agency said in a statement.
“The most important consequence is the human cost […]. This rating announcement addresses the credit implications of recent events,” the agency underlines.
“Previously, the outlook was stable,” said Moody’s, which, during this review, “will assess whether the conflict is likely to move toward resolution or whether there is a likelihood of significant escalation over an extended period.”
“The review will focus on the likely duration and scale of the conflict, and on assessing its implications for Israeli institutions, particularly the effectiveness of its policies, its public finances and its economy,” Moody’s said. which adds that “the review period could be longer than the usual three months”.
Moody’s particularly underlined the unusual nature of this war triggered by the Hamas attack on October 7.
“Israel’s credit profile has proven resilient to terrorist attacks and military conflicts in the past. However, the seriousness of the current conflict raises the possibility of a material and lasting impact on credit,” underlines the agency.
“While a short-term conflict can still have an impact on credit, the longer and more severe the military conflict, the greater its impact is likely to be on policy effectiveness, public finances and the economy.” , specifies the rating agency.
For Fitch, the rating could not be downgraded if there was “a de-escalation of the conflict, limiting the risk of material and prolonged impact on the economy and public finances” of Israel.
On October 7, more than 1,400 people were killed on Israeli territory during a bloody attack carried out from Gaza by fighters from the Palestinian Islamist movement Hamas.
According to the Israeli army, around 1,500 Hamas fighters were killed in the counter-offensive which allowed Israel to regain control of the attacked areas.
In the Gaza Strip, more than 3,700 Palestinians, mostly civilians, were killed in retaliatory bombings carried out by the Israeli army, according to the latest report from local authorities.