S&P Global Ratings Revises Israel's Credit Outlook to Stable Amid Ceasefire

S&P Global Ratings Upgrades Israel's Outlook

S&P Global Ratings, a leading international credit rating agency, announced on Friday, November 7, 2025, that it has revised Israel's credit outlook from 'negative' to 'stable'. The agency simultaneously affirmed Israel's long- and short-term sovereign credit ratings at 'A/A-1'. This marks the first positive adjustment to Israel's credit status since the outbreak of recent conflicts, following downgrades by major rating agencies last year.

The decision primarily stems from a perceived 'military de-escalation' in the region, underpinned by a US-brokered ceasefire agreement between Israel and Hamas. S&P Global Ratings indicated that this agreement is expected to reduce immediate security risks and alleviate pressure on Israel's economy, labor market, and public finances.

Reasons for the Outlook Revision

S&P analyst Karen Vartapetov highlighted that the stable outlook reflects the 'assumption that the scale of direct military confrontation will remain contained, even if tensions between Hamas and Israel persist and the broader regional security environment remains fragile.' This containment is anticipated to 'soften pressure on Israel's economy, labor market and public finances.'

The agency had previously lowered Israel's credit outlook to negative in October 2023 following the commencement of the war with Hamas and downgraded its credit rating twice in 2024.

Economic Projections and Remaining Risks

S&P Global Ratings projects that Israel's real GDP growth will reach 5% in 2026, driven by stronger consumer and business confidence and a decline in reserve soldier mobilization, which will help ease labor shortages. The Finance Ministry's chief economist, Shmuel Abramzon, also revised the country's growth forecast for 2025 to 2.8%, with a projected 5.1% for 2026.

Despite the improved outlook, S&P noted that Israel's GDP is likely to remain below pre-war trends due to the lasting effects of the conflict, including persistent labor supply constraints. Fiscal forecasts indicate a general government deficit slightly below 6% of GDP in 2025 and 4.8% in 2026, with net government debt expected to reach 67% of GDP by 2028, up from 55% before the war. Defense spending, which peaked at 8% of GDP in 2024, is expected to decrease but remain elevated compared to pre-war levels.

The agency also cautioned that significant geopolitical risks persist, including:

• Continued activities by the Israel Defense Forces in Lebanon and Syria.
• The potential for another round of direct military confrontation with Iran.
• Differing international views on post-war arrangements in Gaza, which could hinder a durable peace agreement.

S&P warned that a marked weakening of Israel's economic, balance-of-payments, or fiscal performance, particularly due to military escalation, could lead to a future downgrade. Conversely, stronger-than-projected growth and fiscal outcomes, or a lasting reduction in regional geopolitical risks, could lead to further rating improvements.