The rating agency sees geopolitical risks for Israel remaining high, and says that the impact of the war on the country’s economy and fiscal position could turn out to be worse than currently estimated.
International credit rating agency Moody’s announced yesterday evening that it was retaining its Baa1 sovereign rating for Israel, but the agency also kept its negative outlook, which means that there is a reasonable risk of a rating downgrade in the near future.
Moody’s said that renewed conflict with Iran or expansion of the current conflict to other fronts could harm Israel’s status. In addition, the agency sees Israel’s debt to GDP ratio rising to 75% in the medium term, a significant change from its previous forecast before the war with Iran, which was 70%. The amended forecast is due to higher defense expenditure and the harm to economic growth.
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Moody’s sees Israel’s economy growing by 2% in 2025, and by 4.5% in 2026.
Despite the ceasefires with Iran and with Hezbollah in the north, Moody’s still sees very high geopolitical and security risks for Israel. It calls the ceasefire with Iran “fragile”, and says that the consequences of these risks for the fiscal and economic forecasts for Israel could be more severe than currently estimated. It also states that even if there is no military escalation, a rating downgrade could ensue from long-term negative impacts on Israel’s economy or public finances turn out to be greater that currently assumed.
Published by Globes, Israel business news – en.globes.co.il – on July 8, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
Moody’s offices in Vilnius credit: Shutterstock/Andrius Zemaitis
