Stable Outlook for Italy’s Economy: DBRS Morningstar Confirms BBB (High) Rating

The Morningstar DBRS agency has confirmed Italy’s BBB (high) rating with a stable trend. Despite the effects of a more restrictive monetary policy and a weaker external context, Italy’s economy is expected to gradually resume growth as household purchasing power and financial and external conditions improve. The implementation of Italy’s National Recovery and Resilience Plan is expected to help mitigate weaker residential investment over the next two years.

In 2023, Italy’s fiscal deficit reached 7.4% of GDP, above the government’s forecast of 5.3% of GDP, largely due to tax credits such as the Superbonus. However, Italy’s public debt-to-GDP ratio fell faster than expected to 137.3% of GDP in 2023, thanks to nominal GDP growth. While the fiscal impact of these incentives is expected to decrease in the future, it will lead to increased financial needs and a rise in Italy’s public debt/GDP ratio in the coming years.

The credit ratings are constrained by Italy’s political context, which hinders government stability and the ability to address economic challenges. However, several supporting factors have been taken into account by DBRS Morningstar when confirming Italy’s Bbb (high) rating. These include membership in the European Union and support from the European Central Bank, diversification and resilience in the manufacturing sector, as well as a positive net international investment position. Furthermore, Italy’s banking system is in a stronger position in terms of capitalization and net impaired assets.