Fitch is keeping its outlook for Israel's economic future negative, warning of possible downgrades in the future.
"In our view, the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts," Fitch warned in a statement that accompanied the credit downgrade. (Related: COUNTRY IN COLLAPSE: 46,000 Israeli businesses have shut down since October 7.)
Part of Fitch's concerns come from an expectation that the Israeli government will be permanently increasing its military spending closer to 1.5 percent of GDP versus pre-war levels, putting significantly more pressure on the country's budget deficit and debt levels.
"Public finance have been hit and we project a budget deficit of 7.8 percent of GDP in 2024 and debt to remain above to 70 percent of GDP in the medium term," warned Fitch, describing how additional military spending, combined with attacks on Israeli infrastructure and damage to investment and economic activity could prove disastrous to Israel.
The median debt-to-GDP ratio for nations with an "A" credit rating is 55 percent. Similarly, Israel's budget deficit has already reached 8.1 percent of GDP as of July. The government claims the deficit will shrink to 6.6 percent of GDP by the end of the year.
This is not the first time the conflict in Gaza has negatively affected Israel's economic outlook. Earlier this year, both Moody's and S&P Global issued similar cuts to their credit rating for Israel, with both citing the elevated geopolitical risks that come with investing in Israel.
The value of Israel's currency, the new shekel, fell by 1.7 percent against the American dollar on the day Fitch released its assessment. The Tel Aviv Stock Exchange ended over one percent lower on the same day as investors fretted over a possible escalation of the conflict. The value of the shekel has yet to recover since Monday.
Israeli government claims its economy remains strong
Responding to Fitch's decision, Israel's extremist Minister of Finance Bezalel Smotrich said it was only "natural" for Israel's credit ratings to take a hit, given the war and the geopolitical risks associated with investing in the Israeli economy. Despite this, Smotrich claimed the country's economy remains strong.
"Israel's economy is strong and we are navigating it correctly and responsibly," claimed Smotrich, adding that "the economic indicators point to the economy's robustness and the high trust we have in the markets."
Responding to fears of higher debts and bigger budget deficits, Smotrich claimed that the government "will pass a responsible budget," however he noted that military spending will remain high "to support all the needs of the war on all fronts until victory."
Prime Minister Benjamin Netanyahu gave a similar statement, saying that he expects the country's credit ratings to increase once Israel wins the war.
"Israel's economy is strong and is functioning very well," he said in a statement. "The rating downgrade is a result of Israel dealing with a multi-front war forced upon it."
Finance Ministry Accountant General Yali Rothenberg also claimed that Israel's economy was strong and the country is still freely and enthusiastically participating in global capital markets. He is advising the government to pass a government budget for the 2025 fiscal year that would rebuild the country's fiscal reserves through a gradual decrease of the country's debt-to-GDP ratio.
Preliminary discussions on the state budget for the next fiscal year – which begins in January 2025 – have already begun. Smotrich claims the government's "responsible budget" will be approved "very quickly," and the country's credit ratings "will rise again."
Watch this Aug. 2 episode of "Brighteon Broadcast News" as host Mike Adams, the Health Ranger, discusses why the world despises the violence and terror wrought by the government of Israel.
This video is from the Health Ranger Report channel on Brighteon.com.
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Israel's DEBT has doubled to nearly $43 billion since declaring war on Gaza.
Israel faces cascading DEBT COLLAPSE as Jewish state hit with credit rating downgrade.
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