A month after the ceasefire in Gaza was agreed, S&P Global Ratings revised Israel’s outlook from negative to stable.
“The U.S.-brokered ceasefire agreement between Israel and Hamas could provide space for military de-escalation and reduce the probability of larger-scale tensions in Gaza and the wider region,” the stock market index said in the statement. “This could soften pressure on Israel’s economy, labor market, and public finances.”
Yet S&P also flagged uncertainty over Israel’s fiscal settings for 2026 ahead of the general election.
Credit rating agency ‘Moody’s’ lowers Israel’s outlook
“Labor supply constraints will likely persist as more mobilized workers will likely remain in the military compared with before the war, and Palestinian workers formerly employed in the construction industry (which constitutes 5% of GDP) are only partly replaced by foreign labor,” it added.
The cabinet is due to vote next month on the long-delayed 2026 budget, Finance Minister Bezalel Smotrich said last week, yet approval faces stiff political resistance that could trigger early polls.
The finance ministry cut its 2025 economic growth forecast to 2.8%, and expects 5.2% growth in 2026. It estimates a budget deficit of 3.2% of GDP next year.