Fitch Cuts Israel's Credit Rating amid Rising Middle East Tensions

The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London,Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo Purchase Licensing Rights
The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London,Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo Purchase Licensing Rights
TT

Fitch Cuts Israel's Credit Rating amid Rising Middle East Tensions

The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London,Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo Purchase Licensing Rights
The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London,Britain, March 3, 2016. REUTERS/Reinhard Krause/File Photo Purchase Licensing Rights

Credit ratings agency Fitch downgraded Israel's credit rating to "A" from "A-plus" on Monday, citing worsening geopolitical risks as the war in Gaza drags on, and kept the rating outlook negative, meaning a further downgrade is possible.

"In our view, the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts," the ratings agency said in a statement, Reuters reported.

"The downgrade following the war and the geopolitical risks it creates is natural," Israeli Finance Minister Bezalel Smotrich said on X.

Fears that the conflict in Gaza could turn into a broader Middle East war have escalated after the killing of Hamas leader Ismail Haniyeh in Iran and top Hezbollah military commander Fuad Shukr in Beirut.

Israel's shekel fell as much as 1.7% against the dollar on Monday and stocks ended over 1% lower in Tel Aviv (.TA125), opens new tab as investors fret over a possible attack on Israel.

Heightened tensions between Israel and Iran and its allies could imply significant additional military spending, destruction of infrastructure and damage to economic activity and investment, Fitch said.

The ratings agency expects the Israeli government to permanently increase military spending by close to 1.5% of GDP versus pre-war levels as the country strengthens its border defenses.

"Public finances have been hit and we project a budget deficit of 7.8% of GDP in 2024 and debt to remain above to 70% of GDP in the medium term," Fitch said. It forecast the country's debt will remain on an upward trend beyond 2025 if higher military spending and economic uncertainties continue.



Turkish Gold Demand Lifts Italian Jewellery Exports as Leather Goods Suffer

A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
TT

Turkish Gold Demand Lifts Italian Jewellery Exports as Leather Goods Suffer

A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights
A person passes by a gold shop in Ankara, Türkiye May 29, 2023. REUTERS/Yves Herman/File Photo Purchase Licensing Rights

A surge in demand for gold from inflation-stricken Türkiye boosted exports of jewellery from Italy's industrial district of Arezzo in Tuscany, data showed on Monday, offsetting a drop in leather goods sales from the nearby Florence area.

Demand from Türkiye, where inflation was running at 61.8% in July, drove jewellery exports from the Arezzo area up 133% in the first quarter of the year versus 2023, an Intesa Sanpaolo report on Italy's industrial districts showed.

Exports from the other two Italian jewellery districts, the northeastern Vicenza area and Valenza Po, in Piedmont, also rose.

Gold is considered a hedge against higher inflation and a safe store of value in times of uncertainty, Reuters reported.

Exports from the Arezzo jewellery district totalled 1.8 billion euros ($2 billion) in the first quarter, from 800 million a year before, Intesa said.

That is welcome news for the Tuscan economy, which has been hit hard by the global slowdown in luxury goods demand, with exports of leather goods from the Florence district down 23% in the first quarter to 1.35 billion euros.

Tuscany is home to hundreds of small suppliers of the luxury goods industry and a cooling in demand led by China, which has dealt a blow to brands like Kering's Gucci, prompted companies to put thousands of local workers on furlough.

"Districts that supply the fashion industry have suffered from a drop in consumer spending, but also a normalisation of stock levels after two years of strong increase, and the reorganisation of logistics by distributors," the report said.

Meanwhile, Tuscan olive oil exports jumped 72% year-on-year to 382 million euros in the first quarter.

Overall, exports from Italy's industrial districts - small hyper-specialised production areas - fell 1.1%, Intesa said, adding slowing world trade had been driving a decline since spring 2023 - though from high levels.

The districts' exports hit a record high in 2022 above 150 billion euros and remained broadly stable in 2023. Exports are above pre-pandemic levels by nearly 20% overall.

The only exception are intermediate goods exports in the fashion industry which are 10% lower than in the first quarter of 2019.