Israel’s credit rating was revised by S&P Global Ratings on Friday to “stable,” after its outlook was formerly labeled “negative,” the US credit rating agency announced.
This comes a month into the ceasefire following the Israel-Hamas War that strained the country's economy.
"The US-brokered ceasefire agreement between Israel and Hamas could provide space for military de-escalation and reduce the probability of larger-scale tensions in Gaza and the wider region” and “could soften pressure on Israel’s economy, labor market, and public finances,” S&P Global Ratings stated, adding that “we revised our outlook to stable from negative and affirmed our ‘A/A-1’ sovereign ratings on Israel.”
S&P Global Ratings then warned in its announcement that a downgraded rating is possible “if Israel’s economic, balance-of-payments, or fiscal performance weakened markedly beyond our forecast,” adding that such a possibility would only likely occur as a result of military escalation in the region, and that the possibility of escalation constrains Israel’s credit rating from being higher.
Alternatively, they said that Israel’s credit rating could rise if the country’s growth and fiscal outcomes are stronger than what S&P Global Ratings has already projected.
The country’s wealthy and diverse economy contributed to its credit strengths, S&P added.
Israel's GDP growth
The credit agency said that Israel’s real GDP growth could be pushed to 5% next year with the military de-escalation, projecting that its GDP growth has rebounded strongly in the second half of this year.
Last October, S&P Global lowered Israel's long-term rating from A+ to A, and cited a "significant increase of geopolitical and security risks around Israel" at the time.
The agency explained last year that October’s downgrade was a reflection of “the fallout on Israel’s economy and public finances from a worsening conflict with Hezbollah in Lebanon.”
S&P, however, had predicted last year that economic recovery would slow with real GDP growth of 2.2% in 2025.
Eve Young contributed to this report.