(Bloomberg) -- Israel and Saudi Arabia saw their sovereign-risk scores worsen the most during the first half of the year as fiscal positions deteriorated in both countries, according to Goldman Sachs Group Inc. 

Israel’s war with Hamas and its drain on public finances led to the sharpest decline in sovereign-risk score in emerging markets during the first six months of 2024, according to Farouk Soussa, an economist at Goldman. 

Fiscal pressures in Saudi Arabia were the biggest among neighboring Gulf countries, Goldman said. “Elevated spending on Vision 2030-related giga-projects reduces the scope for expenditure consolidation in the medium term,” Soussa wrote in the report published Monday, referring to Crown Prince Mohammed Bin Salman’s ambitious plan to transform the economy.

Saudi Arabia is forecasting budget deficits every year through 2026 at least. The costs to fund multi billion dollar projects have been adding up for the country that still relies on energy to provide the bulk of government revenue. 

Downward revisions to fiscal-balance forecasts due to lesser oil revenues led to lower scores for other Arab Gulf countries including Oman and Bahrain. 

Goldman takes into account economic, governance, fiscal, external and monetary metrics to come up with its overall risk score out of five. The change in Israel’s score during the first half of this year compared with the second half of 2023 was -2.81, while the difference for Saudi Arabia’s stood at -1.21, according to the report. 

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