Fitch downgrades Israel's credit rating due to the impact of the conflict in Gaza.

The recent decision by the rating agency Fitch to downgrade Israel's credit rating to "A" from "A+" has raised concerns about the country's economic strength amid a prolonged war conflict. This move, announced on Monday night, is attributed to the escalation of the war in Gaza and an increasingly uncertain geopolitical environment. For Israeli Finance Minister Bezalel Smotrich, this downgrade was a logical consequence of the current situation, describing the conflict as "the longest and most expensive existential war in the country's history." Smotrich, known for his far-right positions, emphasized that the war is being fought on multiple fronts and that its duration has had a significant impact on the economy. According to the minister, Fitch's downgrade reflects the inherent risks of a conflict that has resulted in a devastating toll, with nearly 40,000 dead in Gaza, including many civilians. In response to the situation, Prime Minister Benjamin Netanyahu's office attempted to calm fears by asserting that the Israeli economy remains solid and stable. Fitch's analysis indicates that projections for 2024 are alarming, with a budget deficit that could reach 7.8% of Gross Domestic Product (GDP). This figure is concerning, especially in a context where state debt is expected to remain above 70% of GDP in the medium term. The agency also warned that governance indicators could deteriorate, further affecting Israel's credit profile. Amid this discouraging outlook, Smotrich stated that the government would commit to approving a responsible budget for 2025, aimed at addressing the needs arising from the conflict. The minister expressed optimism, suggesting that Israel's credit rating could quickly recover once the war comes to an end, a forecast that may seem uncertain given the prolonged violence. Fitch's downgrade is not an isolated phenomenon. In February, Moody's had already taken a similar step, lowering Israel's economic credit rating to "A2" with a negative outlook. This was the first time in the agency's history that such a decision was made, reflecting the severity of the situation. Additionally, in April, S&P Global also decided to downgrade Israel's rating, citing the drone and missile attacks from Iran as a determining factor. Economic analysts have expressed concern about the impact that the conflict, which has already lasted over ten months, will have on the economy in the immediate future. S&P Global estimated that the government deficit could widen to 8% of GDP in 2024, as defense spending increases. This situation suggests that the conflict is not only affecting political stability but is also leaving deep scars on the Israeli economy. The war between Israel and Hamas, along with tensions with Hezbollah, does not seem to have an end in sight. Projections indicate that these confrontations will continue, potentially exacerbating the country's economic situation. Reports of the humanitarian crisis in Gaza, which have been the subject of international condemnation, also influence perceptions of governance and the rule of law in Israel. The current context raises questions about the Israeli government's ability to manage both the war and its economic implications. In an environment where violence and instability are the norm, confidence in the economy may be eroded, which in turn could limit foreign investment and economic growth. As the situation unfolds, it will be crucial to observe how the Israeli government addresses these challenges. The way in which both the war and the economy are managed in the coming months will determine not only the immediate future of the country but also its position on the international stage. In a world where financial markets react quickly to geopolitical changes, Israel's ability to regain its credit rating will depend on its skill in resolving the conflict and managing its economy in turbulent times.