Fitch downgraded Italy’s credit rating to BBB- yesterday, down from BBB, with a stable outlook. The rating is now just a single notch above “junk level”. The agency said “the downgrade reflects the significant impact of the global Covid-19 pandemic on Italy’s economy and the sovereign’s fiscal position…. According to our baseline debt dynamics scenario, the [debt] to GDP ratio will only stabilise at this very high level over the medium term, underlining debt sustainability risks.”
Fitch also warned “downward pressure on the rating could resume if the government does not implement a credible economic growth and fiscal strategy that enhances confidence that general government debt/GDP will be placed on a downward path over time.”
Italian Finance Minister Roberto Gualtieri responded and said “the fundamentals of Italy’s economy and public finances are solid”.He added that Fitch’s move didn’t take into account the measures by EU. “In particular, the strategic orientation of the European Central Bank does not seem to be adequately valued.”
