TEL AVIV, September 28. /TASS/. The Moody’s international credit rating agency has downgraded the Israeli government’s long-term local and foreign-currency issuer ratings from A2 to Baa1 due to a negative outlook, the agency said in a statement.

According to Moody’s, the move stems from the escalation of Israel’s conflict with the Lebanon-based Hezbollah movement.

"The key driver for the downgrade is our view that geopolitical risk has intensified significantly further, to very high levels, with material negative consequences for Israel's creditworthiness in both the near and longer term. The intensity of the conflict between Israel and Hezbollah has increased significantly in recent days," the statement reads. "This is in the context of Israel's publicly-stated objective to return its evacuated residents back to the North of the country. Achieving this objective is likely to involve a yet more intense conflict. At the same time, prospects for a ceasefire in Gaza have receded and we assess that domestic political risks have increased alongside geopolitical risks," Moody’s added.

According to the agency, "the risk of a broader escalation involving Iran remains, even though it continues to be low."

Moody’s experts "expects real GDP growth of only 0.5% this year, and have materially lowered our expectation for growth next year to just 1.5%, from 4% previously."

In February, Moody’s lowered Israel’s ratings from A1 to A2.