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Moody's changes outlook on Italy to negative; affirms Baa3 ratings

08 Aug '22
2 min read
Pic: Shutterstock
Pic: Shutterstock

Moody's Investors Service recently changed the outlook on the Italian government to negative from stable and affirmed the local- and foreign-currency long-term issuer and senior unsecured ratings at Baa3, which reflect Italy's economic strengths, including a robust manufacturing sector, high household wealth and the low debt of the private sector.

While growth and fiscal developments delivered positive surprises in 2021 and early 2022, risks to Italy's credit profile have been accumulating more recently because of the economic impact of Russia's invasion of Ukraine and domestic political developments, both of which could have material credit implications, Moody’s said in a note.

There are heightened risks that the political environment will impede the implementation of structural reforms, including those contained in Italy's National Recovery and Resilience Plan (NRRP). There is also an increased risk that energy supply challenges will weaken economic prospects, it noted.

There exist risks that Italy's fiscal strength will be further weakened by sluggish growth, higher funding costs and potentially weaker fiscal discipline, Moody’s observed.

The rating reflects Moody's assumption that core euro area countries will support Italy in case of need, a view that has been confirmed by the European Central Bank's (ECB) recent announcement of the Transmission Protection Instrument (TPI).

Italy's local- and foreign-currency ceilings remain unchanged at Aa3.

Fibre2Fashion News Desk (DS)

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