Moody’s downgrades Israel’s credit rating, changes outlook to negative

US-based credit rating agency Moody’s downgraded Israel and changed the country’s outlook to negative due to the ongoing war in Gaza, according to a report published on Friday.

Moody’s changed the rating to A2 from A1, concluding a review that began on Oct. 19, almost two weeks after the Hamas attack on Israel.

“The main driver for the downgrade of Israel’s rating to A2 is Moody’s assessment that the ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” the report said.

Prime Minister Benjamin Netanyahu’s government has shown no signs of looking to end the military campaign in Gaza, which the embattled premier said would lead to the defeat of Hamas.

Gaza’s Health Ministry, which Hamas runs, says that over 27,000 Palestinians have been killed. Among those are thousands of innocent men, women and children.

The US intelligence community has reportedly told lawmakers on Capitol Hill that Israel would be unlikely to defeat Hamas entirely. Instead, it could and had degraded the militant group’s capabilities to launch future attacks.

Moody’s also highlighted that there was no agreement in the pipeline to fully restore and eventually strengthen security for Israel.

Such a weakened security environment brings a higher social risk and could lead to weaker executive and legislative institutions than previously assessed by Moody’s.

Moody’s also pointed to Israel’s deteriorating public finances and a previously projected downward trend in the public debt ratio that has now reversed.

The report said, “Moody’s expects that Israel’s debt burden will be materially higher than projected before the conflict.”