According to a report released this week by credit rating agency S&P, Israel’s economy will drop 5% in the fourth quarter of this year due to rising geopolitical and security threats associated with the conflict with Palestinian militant group Hamas.
Lower company activity, declining consumer demand, and a “very uncertain” investment environment were mentioned by the rating agency.
S&P forecasts an Israeli fiscal deficit of 5.3% of GDP in 2023 and 2024, up from 2.3% before the war.
The Israeli government has increased spending to pay the military and compensate businesses along the Gaza border, as well as the relatives of victims and hostages kidnapped by Hamas. This has resulted in a record budget deficit, which reached $6 billion last month, a more than $1 billion increase from the previous month.
The S&P report comes after the agency downgraded Israel’s credit outlook from ‘stable’ to ‘negative’ last month, just two weeks after the conflict began on October 7. Ratings agencies Moody’s and Fitch have both put Israel on review for a downgrade.
S&P, on the other hand, said that if the crisis is concluded, it might return Israel’s credit outlook to’stable,’ owing to a reduction in regional security and domestic risks.
