Israel's Credit Rating Downgraded by All Three Agencies in Historic Year
For the first time in history, all three major international credit rating agencies, Moody's, S&P, and Fitch, downgraded Israel's sovereign credit rating within the same year, 2024. Moody's downgraded Israel's rating to Baa1, its lowest ever, citing significant weakening in Israel's economic strength, fiscal resilience, and institutions. S&P lowered its rating twice, first to A-plus from AA-minus in April and then to A in October, while Fitch downgraded Israel from A-plus to A in August. All three agencies assigned a negative outlook to Israel.
These downgrades occurred despite claims by some officials that Israel's credit rating had improved. The article clarifies that S&P's move to A-plus was a downgrade from AA-minus, not an upgrade. Moody's initial downgrade in February was the first time the agency had ever lowered Israel's credit rating. The cumulative effect of these actions has placed Israel's rating in a category shared with countries like Spain and Bulgaria, down from a level previously held by nations like Poland.
The article attributes the downgrades not solely to the ongoing war but also to underlying macroeconomic weaknesses. Bank of Israel data indicates a rise in the debt-to-GDP ratio to 68.5% in 2025, up from approximately 60% before the war. The structural deficit remains high, and the high-tech sector, a key growth engine, employs only about 11.4% of the workforce, creating a dual economy rather than strong, stable foundations. Moody's specifically linked institutional weakening to internal political factors, including the government's judicial reform.
While Moody's later revised Israel's credit outlook from negative to stable in January 2026, the rating itself remained unchanged at Baa1. This revision indicates no immediate risk of further downgrades but does not signal an upcoming upgrade. The article emphasizes that a lower credit rating increases the cost of government borrowing, which is passed on to businesses and consumers through higher interest rates, impacting daily life.
Further signs of economic strain include a decline in high-tech employment in 2024, the first contraction in at least a decade, and a significant number of high-tech workers leaving the country. Layoffs in the sector have intensified, with some companies relocating operations abroad. The article concludes that while the high-tech sector is a source of strength, its recent weakening and limited share of the overall workforce mean it cannot serve as a broad economic anchor.
