“The conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts.”
Credit ratings agency Fitch downgraded Israel’s credit rating to “A” from “A+” on Monday, citing the ongoing war in the Gaza Strip.
“The downgrade to ‘A’ reflects the impact of the continuation of the war in Gaza, heightened geopolitical risks and military operations on multiple fronts,” the rating agency said.
Fitch also kept its rating outlook negative as “the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts,” it said.
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“In addition to human losses, it could result in significant additional military spending, destruction of infrastructure and more sustained damage to economic activity and investment, leading to a further deterioration of Israel’s credit metrics,” the agency added.
Military Spending
Fitch said tensions between Israel, Iran and its allies “remain high”, noting the rocket attack on July 27 that killed 12 civilians, Israel’s assassination of Hamas leader Ismail Haniyeh as well as Hezbollah official Fouad Shukr, as contributing to the negative outlook.
“The war will likely continue until end-2024 with a risk of intense operations continuing beyond,” it said. “This implies continued high spending on immediate military needs, and disruptions to production in the border areas and in tourism and construction.”
The agency also projected “Israel’s central government budget deficit to reach 7.8% of GDP in 2024 after 4.1% in 2023.”
“We project a budget deficit of 4.6% of GDP in 2025 on lower military spending and revenue growth, although it could be wider if the war continues in 2025,” Fitch stated.
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The agency said it expected Israel to “permanently increase military spending by close to 1.5% of GDP versus pre-war levels.”
“Israel is likely to maintain a stronger presence along its borders than in the past, plans to widen mandatory draft and to increase domestic military production, which would also add to spending,” Fitch continued.
Close to 40,000 Killed
Flouting a UN Security Council resolution demanding an immediate ceasefire, Israel has faced international condemnation amid its continued brutal offensive on Gaza.
Currently on trial before the International Court of Justice for genocide against Palestinians, Israel has been waging a devastating war on Gaza since October 7.
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According to Gaza’s Ministry of Health, 39,897 Palestinians have been killed, and 92,152 wounded. Moreover, at least 11,000 people are unaccounted for, presumed dead under the rubble of their homes throughout the Strip.
Israel says that 1,200 soldiers and civilians were killed during the Al-Aqsa Flood Operation on October 7. Israeli media published reports suggesting that many Israelis were killed on that day by ‘friendly fire’.
Mass Exodus
Palestinian and international organizations say that the majority of those killed and wounded are women and children.
The Israeli war has resulted in an acute famine, mostly in northern Gaza, resulting in the death of many Palestinians, mostly children.
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The Israeli aggression has also resulted in the forceful displacement of nearly two million people from all over the Gaza Strip, with the vast majority of the displaced forced into the densely crowded southern city of Rafah near the border with Egypt – in what has become Palestine’s largest mass exodus since the 1948 Nakba.
Later in the war, hundreds of thousands of Palestinians began moving from the south to central Gaza in a constant search for safety.
(PC, Anadolu)
