Fitch Downgrades Israel's Credit Rating Amid Conflict

Fitch Ratings has downgraded Israel's credit rating from A+ to A, primarily due to ongoing military conflicts and geopolitical risks, projecting a 7.8% budget deficit for 2024. While Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu defend the resilience of Israel's economy, emphasizing its strength and stable fundamentals, the downgrade signifies increased risk for global investors. The agency warns that sustained military expenditures could elevate the debt-to-GDP ratio beyond 70% in the medium term. Despite these challenges, Israel's technology sector and fiscal discipline are cited as key strengths that contribute to its economic stability. The government aims to pass a responsible budget that supports wartime needs while promoting growth, with hopes of a credit rating recovery post-conflict. The implications of the downgrade, coupled with the ongoing conflict, underscore the urgent need for fiscal reforms amidst political tensions.