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S&P Says Could Cut Israel's Credit Rating if Conflict Expands Beyond Gaza

Pigeons flutter beside people resting at the seaside in Tel Aviv, Israel, January 28, 2024. REUTERS/Tyrone Siu
Pigeons flutter beside people resting at the seaside in Tel Aviv, Israel, January 28, 2024. REUTERS/Tyrone Siu
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S&P Says Could Cut Israel's Credit Rating if Conflict Expands Beyond Gaza

Pigeons flutter beside people resting at the seaside in Tel Aviv, Israel, January 28, 2024. REUTERS/Tyrone Siu
Pigeons flutter beside people resting at the seaside in Tel Aviv, Israel, January 28, 2024. REUTERS/Tyrone Siu

Israel's sovereign credit rating could be cut if the war with Hamas expands to other fronts, but if this does not happen it should be able to weather the war's economic fallout if it makes needed budget changes to offset higher spending, an S&P Global Ratings director said.
S&P in October affirmed Israel's 'AA-' rating but revised Israel's outlook to "negative" from "stable", citing risks that the Israel-Hamas war could spread more widely with a more pronounced impact on the economy and security situation in the country.
"The negative outlook on the ratings implies that we currently see at least a one-in-three chance of a downgrade over the next one to two years," Maxim Rybnikov, director of EMEA Sovereign & Public Finance Ratings at S&P, told Reuters in e-mailed comments.
He said that if Israel's security and geopolitical risks increase due to an escalation of the conflict - a direct confrontation with Hezbollah in Lebanon or Iran - that could lead to a downgrade.
"We could also lower the ratings if the impact of the conflict on Israel's economic growth, fiscal position, and balance of payments proves more significant than we currently project," Rybnikov said. He said S&P projects Israel's economy will grow by just 0.5% in 2024 and have a cumulative budget deficit of 10.5% of GDP in 2023-2024 "but there are downside risks to these assumptions."
He said he was following discussions on the 2024 budget, which was reopened to include billions of shekels of spending on the war.
The cabinet this month passed a disputed 2024 state budget with amendments adding 55 billion shekels ($15 billion) of spending. It still needs parliamentary approval.
"The big question for us is what happens next," Rybnikov said.
Critics of the budget, including the Bank of Israel, are seeking a cut in nonessential spending and to raise some taxes to offset the war-related costs. Also, some planned cuts to health and internal security were scrapped to ensure passage of the budget in the cabinet.
Some 20 billion shekels a year for defense has been added to the budget.
Bank of Israel Governor Amir Yaron has urged the government not to spend excessively and to offset spending increases needed for the war with reductions elsewhere, along with tax hikes - items that government leaders have dismissed.
"Given Israel’s other credit characteristics, a temporary deterioration in the fiscal position can be weathered," Rybnikov said. "However, if ... the budgetary position turned out to be persistently weaker beyond 2024, without offsetting measures, this could erode Israel’s fiscal room to maneuver."
He said his base scenario is that the conflict will be resolved soon and the budget deficit will move back to 3% of GDP in 2025, from 4.2% in 2023 and a projected 6.6% in 2024, but that there were substantial risks of a lingering or escalating conflict.
"It is already clear that defense spending will be higher in the years to come and the longer-term impact of the war on FDI (foreign direct investment) flows, investor sentiment and other areas remains uncertain," said Rybnikov.
"A persistent, as opposed to temporary, increase in net general government debt without offsetting measures could pose risks. That’s one of the reasons why the ratings are currently on a negative outlook."
He said the ratings outlook could move back to stable if the conflict is resolved, resulting in a reduction in regional and domestic security risks without a material longer-term toll on the economy and public finances.
Credit ratings agency Moody's declined to comment. Moody's in October placed Israel's A1 ratings on review, citing the conflict with Hamas.

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China's Finance Ministry: Fiscal Policies Will be More 'Proactive' in 2026

A man walks on a street in Beijing, China, 24 December 2025. EPA/WU HAO
A man walks on a street in Beijing, China, 24 December 2025. EPA/WU HAO
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China's Finance Ministry: Fiscal Policies Will be More 'Proactive' in 2026

A man walks on a street in Beijing, China, 24 December 2025. EPA/WU HAO
A man walks on a street in Beijing, China, 24 December 2025. EPA/WU HAO

China's finance ministry on Sunday said fiscal policies will be more proactive next year, reiterating its focus on domestic demand, technological innovation and a social safety net.

The statement comes as trading partners urge the world's second-biggest economy to reduce its reliance on exports, underscoring the urgency to revive confidence at home where a prolonged property crisis has rippled ⁠through the economy, weighing on sentiment.

China will boost consumption and actively expand investment in new productive forces and people's overall development, the ministry said in a statement after a two-day meeting at which it set ⁠2026 goals.

In addition, Reuters quoted the ministry as saying that it will support innovation to foster new growth engines, and improve the social security system by providing better healthcare and education services.

Other tasks for next year include promoting integration between urban and rural areas, and propelling China's transformation into a greener society.

China is likely to stick to ⁠its annual economic growth target of around 5% in 2026, government advisers and analysts told Reuters, a goal that would require authorities to keep fiscal and monetary spigots open as they seek to snap a deflationary spell.

Leaders this month promised to maintain a "proactive" fiscal policy next year that would stimulate both consumption and investment to maintain high economic growth.

Business

Bulgaria Adopts Euro Amid Fear and Uncertainty

Customers shop in a grocery store in the village of Chuprene, northwestern Bulgaria on December 7, 2025. (Photo by Nikolay DOYCHINOV / AFP)
Customers shop in a grocery store in the village of Chuprene, northwestern Bulgaria on December 7, 2025. (Photo by Nikolay DOYCHINOV / AFP)
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Bulgaria Adopts Euro Amid Fear and Uncertainty

Customers shop in a grocery store in the village of Chuprene, northwestern Bulgaria on December 7, 2025. (Photo by Nikolay DOYCHINOV / AFP)
Customers shop in a grocery store in the village of Chuprene, northwestern Bulgaria on December 7, 2025. (Photo by Nikolay DOYCHINOV / AFP)

Bulgaria will become the 21st country to adopt the euro on Thursday, but some believe the move could bring higher prices and add to instability in the European Union's poorest country.

A protest campaign emerged this year to "keep the Bulgarian lev", playing on public fears of price rises and a generally negative view of the euro among much of the population.

But successive governments have pushed to join the eurozone and supporters insist it will boost the economy, reinforce ties to the West and protect against Russia's influence.

The single currency first rolled out in 12 countries on January 1, 2002, and has since regularly extended its influence, with Croatia the last country to join in 2023.

But Bulgaria faces unique challenges, including anti-corruption protests that recently swept a conservative-led government from office, leaving the country on the verge of its eighth election in five years.

Boryana Dimitrova of the Alpha Research polling institute, which has tracked public opinion on the euro for a year, told AFP any problems with euro adoption would be seized on by anti-EU politicians.

Any issues will become "part of the political campaign, which creates a basis for rhetoric directed against the EU", she said.

While far-right and pro-Russia parties have been behind several anti-euro protests, many people, especially in poor rural areas, worry about the new currency.

"Prices will go up. That's what friends of mine who live in Western Europe told me," Bilyana Nikolova, 53, who runs a grocery store in the village of Chuprene in northwestern Bulgaria, told AFP.

The latest survey by the EU's polling agency Eurobarometer suggested 49 percent of Bulgarians were against the single currency.

After hyperinflation in the 1990s, Bulgaria pegged its currency to the German mark and then to the euro, making the country dependent on the European Central Bank (ECB).

"It will now finally be able to take part in decision making within this monetary union," Georgi Angelov, senior economist at the Open Society Institute in Sofia, told AFP.

An EU member since 2007, Bulgaria joined the so-called "waiting room" to the single currency in 2020, at the same time as Croatia.

The gains of joining the euro are "substantial", ECB president Christine Lagarde said last month in Sofia, citing "smoother trade, lower financing costs and more stable prices".

Small and medium-sized enterprises stand to save an equivalent of some 500 million euros ($580 million) in exchange fees, she added.

One sector expected to benefit in the Black Sea nation is tourism, which this year generated around eight percent of the country's GDP.

Lagarde predicted the impact on consumer prices would be "modest and short-lived", saying in earlier euro changeovers, the impact was between 0.2 and 0.4 percentage points.

But consumers -- already struggling with inflation -- fear they will not be able to make ends meet, according to Dimitrova.

Food prices in November were up five percent year-on-year, according to the National Statistical Institute, more than double the eurozone average.

Parliament this year adopted empowered oversight bodies to investigate sharp price hikes and curb "unjustified" surges linked to the euro changeover.

But analysts fear wider political uncertainty risks delaying much needed anti-corruption reforms, which could have a knock-on effect on the wider economy.

"The challenge will be to have a stable government for at least one to two years, so we can fully reap the benefits of joining the euro area," Angelov said.

Business

Syria Prepares to Launch New Currency Amid Major Challenges

Syrian Central Bank Governor Abdulkader Husrieh (X)
Syrian Central Bank Governor Abdulkader Husrieh (X)
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Syria Prepares to Launch New Currency Amid Major Challenges

Syrian Central Bank Governor Abdulkader Husrieh (X)
Syrian Central Bank Governor Abdulkader Husrieh (X)

Syria’s central bank governor, Abdulkader Husrieh, said the new Syrian pound is not merely a means of exchange but a symbol of the success of the Syrian revolution, national belonging, and confidence in the country’s ability to recover.

In a Facebook post, Husrieh said that with the launch of the new currency, Syrians were not just celebrating a banknote, but also celebrating their sovereignty and national identity, noting that many international experiences show that national currencies become strong when people rally around them, according to the Syrian Arab News Agency.

He pointed to Germany’s experience, where the introduction of the mark after the war marked the starting point of economic recovery, and to France, where the new French franc became the financial symbol of the new republic, known as the Fifth Republic.

Husrieh said the central bank would carry out its role with a clear understanding of the challenges and opportunities, while committing to responsibility, transparency, and the protection of the national currency. He added that the cornerstone remains public solidarity and trust, because a strong currency begins with the people's belief in it.

He called for turning the launch into a dignified national occasion through which Syrians express awareness, confidence, and adherence to the pound as a symbol of sovereignty and a national choice.

Husrieh added that supporting the pound is supporting the nation, and taking pride in it is a matter of pride in the future for Syrians and their children. He described the move as an opportunity for a new success following the success of the revolution in liberation and the lifting of economic sanctions that had shackled Syria’s economy for nearly fifty years.

Husrieh had recently announced that Jan. 1, 2026, would mark the launch of the new Syrian currency and the start of the exchange process for the old notes, with the exchange to be carried out through 66 companies and 1,000 designated outlets.

Restoring confidence

Political and economic researcher Bassel Kouwefi said the exchange plans, if well implemented, could serve as an entry point for rebuilding confidence in the national economy, encouraging domestic investment, and paving the way for broader reforms in the financial sector. However, he warned against failing to address the root causes of inflation and economic collapse during the previous regime's rule.

Speaking to Asharq Al-Awsat, Kouwefi described currency exchange and the removal of zeros as complex economic measures.

He said their main benefits include simplifying daily transactions, reducing the volume of banknotes in circulation, boosting confidence in stability, lowering printing and transportation costs, simplifying accounting records and financial software, and reducing currency speculation driven by corruption networks seeking to undermine stability in Syria.

Kouwefi said the exchange plans, if well-executed, could help restore confidence in the macroeconomy, but stressed the challenges posed by failing to tackle the fundamental causes of past inflation and collapse, including fiscal deficits, instability, and weak production. He said a comprehensive economic and financial program was therefore essential.

He added that the process also requires strong banking infrastructure, an organized transition period, and sufficient liquidity in the new denominations.

He said these remain major challenges under current Syrian conditions, alongside the need to mitigate social impacts that could lead to public confusion, market exploitation, and difficulties for less informed segments of society.