Moody's places Israel's credit ratings on review for downgrade

NEW YORK, Oct. 19 (Xinhua) -- Ratings agency Moody's on Thursday put the Israeli government's A1 credit ratings on review for downgrade, citing the "unexpected and violent conflict between Israel and Hamas."

The military conflict is increasing Israel's already relatively high exposure to geopolitical risks, Moody's said in a statement.

"The severity of the conflict raises the possibility of longer lasting and material credit impact," the agency said. "While a short-lived conflict could still have credit impact, the longer lasting and more severe the military conflict, the greater its impact is likely to be on policy effectiveness, public finances and the economy."

Israel spends around 4.5 percent of its gross domestic product on defense, considerably more than other countries in the Organisation for Economic Co-operation and Development, Moody's noted, adding that the country is expected to increase defense spending as part of the current conflict.

Moody's warned that it would downgrade Israel's ratings if "the current military conflict was likely to materially weaken Israel's institutions, in particular the effectiveness of its policymaking, its fiscal and/or its economic strength."

Earlier this week, another global ratings agency Fitch placed the country on rating watch negative and warned a major escalation of the ongoing conflict could result in a negative rating action.