Fitch Warns Political Deadlock Could Delay Israel’s 2027 Budget

Fitch Ratings warned on October 30 that Israel’s post-election political deadlock could prolong caretaker government and delay approval of the 2027 budget. Its assessment follows the October 27 election and is commentary, rather than a new rating decision. Fitch said the risks remain consistent with Israel’s A rating and Negative Outlook. The agency’s baseline scenario is Knesset dissolution in early January and another election in early April 2027. It considers a budget before that election unlikely because the outgoing coalition lacks a parliamentary majority. These are Fitch’s scenarios, not announced election dates. A broad government combining Netanyahu’s and Eisenkot’s blocs is possible, but is not its baseline. Fitch said continuing-budget rules could constrain expenditure by limiting monthly spending against the previous year’s ceiling, with a population adjustment. The 2026 ceiling is NIS 699 billion, while permitted expenditure is NIS 32 billion higher. Such restrictions could temporarily narrow the deficit, but Fitch would not treat a reduction caused by political paralysis as lasting fiscal improvement. It expects the government debt-to-GDP ratio to keep rising modestly, a central reason for its Negative Outlook. The agency compared the risk of repeated caretaker governments with 2019–2022, when Israel held five elections.