S&P Global Ratings kept Italy’s rating unchanged at ‘BBB’ but revised its outlook to ‘positive’ from ‘stable’, motivating the decision with the estimate of “a strong recovery driven by investments in 2021 and 2022 , which will bring Italian GDP back above 2019 levels one year ahead of our forecasts “.
For the agency “the vast majority of the Draghi government should guarantee the implementation at the end of 2021 of the 51 goals and objectives included in the ambitious National Recovery and Resilience Plan”.
S&P expects a deficit of 8.8% of GDP for the 2021 accounts compared to the 9.4% target set by the government, as revenues continue to exceed forecasts. Hence the decision to hike “following the clear strengthening of the commitment to reforms in favor of growth and the positive effects that greater growth will have on public accounts”.
For 2021, Italian real GDP growth should reach 6%, followed by + 4.4% in 2022, writes the S&P agency, observing how the driving factors of this “sustained growth” – which can return “to figures that have not been seen since 1973 “- are high vaccination rates, high private savings, improved business and household confidence, generous EU funds, and recovering tourism. On the public accounts front, however, the agency does not foresee a return to a primary surplus until 2025, while after the deficit of 8.8% estimated for this year, the deficit is expected to fall to 5.8% in 2022. S&P predicts that net public debt at the end of 2021 will stand at 144.8% of GDP (excluding the EFSF guarantees) but notes that “despite the increase in the debt ratio, interest-related expenditure continues to decline “: if in 2012 it was over 5%, in 2021 it is expected to be 3.2% and” considering that the Italian Treasury continues to refinance the debt maturing at around 0.1%, well below the average rate of 2 , 35% paid on the total debt, we believe that the interest expenditure on GDP will fall below 3.0% by 2022 “.
Risks for Italian public accounts from disbursement for MPS
“Complex discussions are underway to allow the acquisition of Monte dei Paschi di Siena by another large Italian bank” but “an agreement would almost certainly require a significant capital injection from the Italian state, representing a potential tax risk “, writes the S&P agency, pointing out the possible negative impact of a public contribution linked to the Mps operation. For the banking sector, the agency reports that “the decline in the levels of non-performing loans, together with the monetary policy measures of the ECB, including towards the banking sector, has supported monetary transmission in Italy” and recalls how “the Italian government is in favor of further consolidation in the financial sector “.
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