developing· Politics· Updated 19:37

Fitch Warns of Continued Political Uncertainty in Israel

The credit rating agency Fitch has warned that Israel faces a prolonged period of political uncertainty and paralysis following the recent election results, which left both major blocs without a clear parliamentary majority. The agency stated that a lengthy period under a caretaker government will hinder efforts to reduce the country's public debt. Fitch maintains Israel's credit rating at 'A' with a negative outlook, citing political divisions and the possibility of a minority government.

3 newsrooms · 2 languages · since 12:14

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What happened

01Fitch warns that Israel faces prolonged political uncertainty and paralysis following the recent election results.
02The agency projects the dissolution of the Knesset in early January and new elections in early April.
03A lack of a 61-seat parliamentary majority increases the risk of an extended caretaker government period.
04Fitch expects the 2027 budget will not be approved before the anticipated new elections are held.
05Operating without an approved budget will limit government spending to one-twelfth of the previous year's budget.
06The agency expects the government debt-to-GDP ratio to continue a moderate rise, maintaining a negative outlook.
07Israel's credit rating remains at 'A' with a negative outlook, signaling risks of a future downgrade.
08A continued negative outlook or downgrade could increase borrowing and financing costs for Israel and its private sector.

Fitch projects that the most likely scenario is the dissolution of the Knesset in early January, leading to new elections in early April. This situation could result in unstable coalitions and interim governments, similar to the period between 2019 and 2022 when Israel held five elections. With the outgoing coalition no longer holding a parliamentary majority, the agency anticipates that the 2027 budget will likely not be approved before new elections are held.

In the absence of an approved budget, government spending will be limited to one-twelfth of the previous year's budget. Fitch expects the government debt-to-GDP ratio to continue its moderate rise, contributing to the negative outlook. The agency cautioned that while the political deadlock might limit expenditures, it does not represent sustainable fiscal measures. The negative outlook signals risks of a credit rating downgrade, which could increase borrowing costs for both the state and the private sector.

Summarized by baba from the reports of 3 newsrooms. Updated 19:51

Latest report: Al-Shams. Read Al-Shams’s original