Fitch Ratings has announced its decision to uphold the country’s credit rating at A+. The decision comes after a thorough review process during which a potential downgrade was under consideration. However, the outlook for Israel’s rating has been downgraded from “stable” to “negative,” signalling a cautionary stance from the international credit rating agency.

The news has sparked a sense of relief within the Ministry of Finance and among the economic elite of the country. Prior to Fitch’s announcement, market analysts had anticipated a downgrade with a probability ranging from 60% to 70%. Yehli Rotenberg, the Accountant General at the Ministry of Finance, had engaged in extensive discussions with Fitch representatives at the company’s London headquarters in recent months, aiming to avert a rating downgrade.

Fitch’s decision to maintain Israel’s rating follows its earlier warning at the outset of the conflict. In October, the agency had placed Israel’s rating under negative watch, indicating a possibility of downgrade within six months. Despite this, Fitch emphasized the resilience of Israel’s economy, particularly citing its dynamic nature with high added value and its historical ability to withstand regional conflicts. However, the agency underscored that the conflict’s escalation into a broader regional event could have altered the rating outcome.

Israel’s credit rating is under further scrutiny as S&P, another major rating agency, is set to announce its evaluation on May 10. Moody’s, a competitor agency, had already downgraded Israel’s rating for the first time in history earlier in February. The divergence in ratings among the agencies, with S&P currently ranking Israel higher than Fitch and Moody’s, presents a unique scenario. Such disparities could exert pressure on S&P to narrow the gap and potentially downgrade Israel’s rating as well.

In response to Fitch’s decision, Finance Minister Smotrich expressed confidence in Israel’s economy and the government’s economic policies. He acknowledged the challenges posed by the ongoing conflict but reaffirmed the government’s commitment to implementing measures to mitigate risks and propel the economy towards rapid growth.

Despite the negative outlook, Fitch’s decision to maintain Israel’s A+ rating underscores confidence in the country’s economic fundamentals. However, the government will likely face increased scrutiny as it navigates through the complexities posed by the ongoing war and strives to uphold economic stability and growth.