Moody's cuts Israel's growth forecast as war risks continue to weigh on the economy

Moody's Ratings has lowered Israel's 2026 economic growth forecast to 3.7% from 5.0% and increased its debt-to-GDP ratio projection to 70%, citing elevated geopolitical risks from ongoing conflicts with Iran, Hezbollah, and Hamas. Despite these revisions, Moody's affirmed Israel's Baa1 sovereign credit rating with a stable outlook, noting the economy's resilience to shocks. The agency stated, "Although the Israeli economy has demonstrated resilience to geopolitical shocks in recent years, the fragile security environment continues to pose risks to the economic and fiscal outlook." An upgrade could occur if ceasefires hold and fiscal performance improves, while a downgrade is possible if geopolitical tensions escalate, economic growth weakens, or institutional strength deteriorates, specifically mentioning judicial institutions.