The stable outlook reflects Fitch’s projection of «a stabilization of public debt/GDP in the final years of our forecasts, close to the end-2022 level
2′ reading
Fitch confirms Italy’s ‘BBB’ rating with stable outlook. This is what we read in a note.
«Italy’s rating – states the agency – is supported by its large, diversified and high value-added economy, by its membership of the Eurozone and by the solidity of its institutions compared to the median of the peer group. These credit characteristics are balanced by weak macroeconomic and fiscal fundamentals, in particular very high government debt, relatively lax fiscal policy post-pandemic, reduced economic growth potential and, more recently, a lower yield environment. high,” explains Fitch.
Debt stabilization
Furthermore, the stable outlook reflects Fitch’s projection of «a stabilization of public debt/GDP in the final years of our forecast, close to the end-2022 level (and similar to the level forecast in our previous review), an expected recovery in execution of EU-funded projects that provide moderate growth support, and the continued broad stability of the coalition, which limits the most pronounced political risk.”
However, “the significant easing of fiscal targets has weakened the deficit adjustment path, with the associated risks of rising yields on new debt issues and non-compliance with EU fiscal rules.”
GDP estimates
Fitch also expects “a slight recovery in GDP growth, to 1.0% in 2024 and 1.3% in 2025, thanks to the acceleration of NextGenerationEU spending”, the Pnrr. This year, execution of the plan “fell significantly short of targets, but we expect it will be supported by a reorganization to streamline subnational projects and deliver more projects through the private sector.”
Moody’s lowers the US outlook
Meanwhile, Moody’s confirms the United States’ ‘Aaa’ rating but cuts the outlook to ‘negative’ from ‘stable’. The agency stated this in a note, underlining that the increase in downside risks on public finances and high interest rates is driving the revision of the outlook.
Moody’s expects the deficit to remain high and believes that the split in Congress will make it difficult to reach a consensus on a debt plan.
The US Treasury says it disagrees with Moody’s decision to downgrade the US outlook to negative. “Our economy remains strong” and Treasuries are the safest asset in the world, the Treasury says.
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2023-11-10 22:07:30
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