JERUSALEM (Reuters) - Ratings agency S&P Global on Tuesday said it expects Israel's economy to recover at a more moderate pace than previous downturns despite an economic bounce-back in the first quarter.
The Israeli economy rebounded in the first quarter after growth was hit late last year at the outset of Israel's war against Hamas in Gaza.
Gross domestic product (GDP) grew an annualised 14.1% in the first quarter from the previous quarter - which had seen a 21.7% annualised contraction.
S&P did not take any rations action but it reiterated its growth estimate of 0.5% for 2024, with the pace expected to accelerate to 5.0% in 2025. It noted the recovery from current fighting would likely be slower than the country's rebounds from COVID or past military conflicts.
Israeli policymakers say that the economy is robust and will bounce back quicker, with the central bank forecasting growth of around 2% in 2024.
"We expect the lingering issues in the impacted tourism, construction, and agriculture sectors, alongside elevated regional security and domestic political uncertainty, will constrain a faster recovery this year," the ratings agency said.
"More broadly, we consider that risks to Israel's credit profile remain elevated," it said, pointing to potential escalation of the conflict with Iran or Hezbollah in Lebanon.
S&P last month cut Israel's long-term ratings to A-plus from AA-minus, citing elevated geopolitical risks and projecting a budget deficit of 8% of GDP in 2024. That followed a ratings cut by Moody's (NYSE:MCO) in February.