By Marc Jones
LONDON (Reuters) - A ceasefire in the war in Gaza should be positive for Israel's under-pressure credit rating, Fitch's top sovereign rating analyst said on Thursday.
Israel's "A" rating is currently on a downgrade warning, or a "negative outlook" in rating agency-speak.
"We've got Israel on negative, I guess that's something that's really related to public finances associated with the war," Fitch's head of sovereign ratings James Longsdon said at a conference held by the firm.
"To the extent that (the war) can sort of stabilize, that would be positive I think there."
Israel's rating had never been downgraded before last year, but the heavy cost of the last 15 months of fighting in both Gaza and Lebanon saw it cut multiple times by the major rating firms such as Fitch, S&P Global and Moody's (NYSE:MCO).
A complex ceasefire accord between Israel and militant group Hamas, which controls Gaza, emerged on Wednesday after mediation by Qatar, Egypt and the U.S.
The truce is due to take effect on Sunday. Israel's acceptance of the deal will not be official however, until it is approved by the country's security cabinet and government.
Israeli Prime Minister Benjamin Netanyahu's said on Thursday he had delayed a meeting to do so, after he had accused militant group Hamas of making additional last-minute demands.
Analysts at Capital Economics said an effective ceasefire would have an "overwhelmingly positive" impact on Israel's public finances.
The research firm's Liam Peach said defence spending there rose to almost 9% of GDP last year, which is three percentage points higher than its average during the 2010s.
A reduction in military spending, a rebound in the economy, tax revenues and fiscal tightening measures as part of a 2025 budget worth 1.8% of GDP should narrow Israel's budget deficit, which came in at 7% of GDP last year.
"We think the conditions are in place for a deficit closer to 4% of GDP this year and for the public debt ratio to move back onto a declining path from 2026," Peach said.