Credit ratings agency Moody’s downgraded Israel’s sovereign credit rating from A1 to A2 on 9 February. “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,” Moody’s says, placing Israel on negative watch for a further downgrade. A2, the sixth highest rating, remains comfortably within investment grade, however.

The “risk of an escalation involving Hezbollah in the north of Israel remains, which would have a potentially much more negative impact on the economy than currently assumed under Moody’s baseline scenario.” The ratings agency believes that “government finances would also be under more intense pressure in such a scenario.” (CONTINUED - 180 WORDS)