Israel faces a downgrade from Fitch, dropping from A+ to A with a negative outlook due to ongoing conflict in Gaza and geopolitical risks. The agency projects a budget deficit of 7.8 percent of GDP in 2024, citing rising tensions and military operations.
The conflict in Gaza is expected to prolong through 2025, leading to increased military spending and economic damage. Despite efforts to reduce the deficit in 2025, Israel’s debt-to-GDP ratio is set to rise, posing challenges for the economy.
Prime Minister Benjamin Netanyahu’s office remains confident in the economy, stating that the rating will improve once the conflict is resolved. Finance Minister Bezalel Smotrich acknowledges the downgrade as natural given the circumstances and emphasizes the need for a strong budget to address the challenges.
The finance ministry stresses the importance of rebuilding fiscal reserves and decreasing debt-to-GDP ratio in the upcoming 2025 budget. The government aims to support the war efforts while maintaining fiscal discipline and promoting growth.
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