Moody’s, without reforms, Italy’s rating cut is likely

Bad news from Moody’s. “We would probably downgrade Italy’s ratings if we were to anticipate a significant weakening of the country’s medium-term growth prospects, probably due to the failure to implement reforms to strengthen growth, including those outlined in the country’s NRP.” This is what Moody’s experts write in an update on Italy’s sovereign credit profile.
They would also be negative for the rating “signals of probable debt growth in a significant way, either due to substantially weaker growth prospects, or due to an increase in interest costs or a decisive fiscal easing”. Fiscal and / or economic policies that weaken market sentiment and cause debt levels to rise over the medium term would also lead to downward pressure on ratings.
What weighs on growth
“While growth and fiscal developments have produced positive surprises in 2021 and early 2022, tighter financing conditions, high inflation, risks to energy supplies from Russia and a more complex political environment are weighing. on the growth prospects of Italy and on the debt dynamics »then underlines Moody’s in its Credit Opinion. “Our vision of Italy’s credit – continues the rating agency – balances the large size of its economy, high household wealth, low private sector debt and economic diversification, against a weak growth potential and high levels of public debt ‘”. Italy’s rating, concludes Moody’s, “also reflects our hypothesis that the central countries of the euro area will be inclined to support Italy in case of need, an opinion confirmed by the recent announcement of the anti-spread shield by the ECB “.