By Stephen Nakrosis


Moody's Investors Service said it downgraded the foreign-currency and local-currency issuer ratings of Israel to A2 from A1, and changed its outlook on the country to negative.

The moves Friday conclude a review for downgrade initiated by Moody's in October 2023.

Moody's said the main driver for the downgrade is its assessment that "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 also said Israel's budget deficit over the coming years "will be significantly larger than expected before the conflict."

Moody's baseline scenario sees the nation's defense spending to be nearly double the level of 2022 by the end of this year, adding it is expected to continue rising by at least 0.5% of gross domestic product in each of the coming years.

The negative outlook reflects downside risks, including the risk of an escalation involving Hezbollah, Moody's said.


Write to Stephen Nakrosis at stephen.nakrosis@wsj.com


(END) Dow Jones Newswires

02-09-24 1731ET