What it is about

Fitch’s top sovereign rating analyst highlighted that a recent ceasefire in Gaza is expected to favor Israel’s currently pressured credit rating. The country’s “A” rating, which had been placed on a negative outlook due to the financial strains of the conflict, shows positive signs of stabilization in light of the ceasefire.

Why it matters

Stabilizing the region shifts Israel towards financial stability, which can potentially lead to an improved credit rating. The heavy economic costs of conflicts over the past fifteen months had led to the downgrade of Israel’s credit by major firms, necessitating financial solutions and defensive spending adjustments.

The Big Picture

The potential benefits highlighted by analysts at Capital Economics focus on Israel’s ability to recover fiscally. An effective ceasefire could significantly reduce defense expenditures that spiked to nearly 9% of GDP and pave the way for economic rebound and fiscal consolidation, aiding in reducing the budget deficit and public debt.

What’s Next

The complex ceasefire accord facilitated by international mediation marks a forward step for Israel towards fiscal sustainability. Strategies including controlling spending, increasing revenues, and budget balancing forecast a shift towards a declining public debt path starting 2026.

This story was first published on timesofisrael.com.