Moody’s Downgrades Israel’s Rating to Baa1
Moody’s Investors Service on Friday downgraded Israel’s credit rating to Baa1 and kept its outlook on the rating at negative amid worsening regional conflict with Lebanon’s Hezbollah militant group.
According to Moody’s, the main driver behind the downgrade is our belief that geopolitical risks have significantly escalated to very high levels, threatening material negative consequences for Israel’s creditworthiness in the near and long term.
Moody’s warned that uncertainty about the country’s security and longer-term economic growth prospects is significantly higher than usual at the Baa rating level.
A drop below that level would mean Israel would lose its investment-grade credit rating.
“The credit rating is likely to be downgraded further, possibly by multiple notches, if the current escalating tensions with Hezbollah escalate into a full-scale conflict,” Moody’s said.
Losing an investment-grade credit rating typically means a sharp rise in the cost of servicing debt, and may force some investors to sell their holdings, putting further pressure on the market price of Israeli bonds to fall.
Fitch downgraded Israel’s credit rating from “A+” to “A” last month, and maintained the rating outlook at “negative”.
