Cautious Optimism as Moody Upgrades Italy’s Credit Outlook to Stable

Italian authorities received Moody’s recent evaluation positively, maintaining the country’s credit ratings at Baa3 while upgrading the outlook from negative to stable.

Economy Minister Giancarlo Giorgetti expressed satisfaction with the outcome in a social media comment.

Moody’s Baa3 rating, positioned as the lowest investment grade level, experienced a shift in its outlook from negative to stable. Previously, in August of the previous year, the agency had attached a negative outlook to Italy’s public debt.

This new assessment brought relief to Prime Minister Giorgia Meloni’s government, as a downgrade of the debt to “junk” status would have significantly undermined the country’s credibility in the markets.

Moody’s rationale for the revised outlook pointed to a stabilization of Italy’s economic strength, the health of its banking sector, and the government’s debt dynamics.

The country’s short-term outlook was supported by the implementation of the National Recovery and Resilience Plan (NRRP) and recent enhancements in the banking sector. Additionally, mitigated risks associated with energy supplies were attributed in part to favourable weather conditions and governmental efforts to diversify supplies and bolster energy infrastructure.

Moody’s previous assignment of a negative outlook to Italy’s Baa3 rating in August 2022 was influenced by perceived “political risks” impeding the country’s ability to enact structural reforms, following former Prime Minister Mario Draghi’s resignation and snap elections.

Economy Minister Giorgetti expressed optimism that the Italian parliament would uphold the government’s prudent, responsible, and serious budgetary approach outlined in the 2024 budget bill.

The newly approved budget, valued at around 24 billion euros (26.2 billion U.S. dollars), underwent Meloni’s cabinet approval in mid-October. Its final approval requires endorsement from both chambers of parliament by year-end, with allowances for potential amendments.

Before Moody’s recent assessment, S&P and Fitch agencies had affirmed their evaluations of Italy’s rating with a stable outlook.

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