Israel-Hamas war: Israel's credit rating unlikely to be downgraded, says Israeli central bank guv

Israel-Hamas war news: Israel will likely manage to avoid its first-ever rating downgrade due to its sound finances, unless the war with Hamas goes on for a prolonged period of time, according to Israeli Central Bank governor Amir Yaron. He also expressed confidence in the economy's resilience. 

"Every war has a considerable economic dimension that includes the impact to the financial markets, and with so many reserve soldiers at the front-lines and civilians in shelters, there is an effect on real economy," Yaron was quoted as saying by Bloomberg.

He added that there should be no major changes to Israel's fundamental fiscal position with appropriate budget adjustments.

Moreover, a senior official at the Finance Ministry's General Accountants' Office told Bloomberg on the condition of anonymity that a downgrade to Israel's sovereign credit rating is an extreme scenario.

The official added that a more realistic possibility is that Israel would be put under credit watch. Any of the three main ratings agencies-- S&P Global, Moody's Investor Service, and Fitch Ratings-- have never downgraded Israel through wars, conflicts and global economic crises. 

The development comes days after global ratings agency Moody's Investors Service postponed a planned review of Israel's rating. The ratings agency said that it will continue to evaluate the wider credit risk of recent hostilities due to the ongoing Israel-Palestine war.

Due to the postponement of review, Israel's credit rating remains unchanged at A1 with a stable outlook at present. The ratings agency had said last week that a prolonged war with Hamas could bring down Israel's credit score. "In the past, Israel's sovereign credit profile has shown resilience to terrorist attacks and military action," the firm said in a note accessed by news agency Reuters. 

"However, a prolonged conflict that durably and significantly impairs economic activity and policymaking would test that resilience," the note further mentioned. 

Surprise attacks by Hamas over the last weekend triggered the worst-ever escalation by Israel, claiming over 3,900 lives on both sides. The Hamas attacks in Israel have claimed at least 1,300 Israeli lives, as per officials.

At least 2,670 people have been killed in Gaza so far due to the counter action taken by Israel's Defence Forces (IDF) and nearly 10,000 have been wounded, as per authorities.

Another 1,000 people are reportedly missing in Gaza and believed to be under the rubble. While Israel's war against Hamas has humanitarian costs, it also has economic costs. The economic cost of the conflict would probably teeter around $6.8 billion or 27 billion shekels. 

(With agency inputs)

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