AGI – The agency Dbrs confirmed the Italian public debt rating at BBB (high). The trend remains negative.
“The Coronavirus Pandemic – we read in the considerations of the rating agency – continues to weigh on Italian public finances and growth prospects. At this stage, there is still little evidence of significant ‘economic scars’ that would undermine Italy’s already fragile growth and, in turn, its debt sustainability in the coming years. However, in the face of considerable uncertainty about the economic recovery, the trend remains negative“.
“Political uncertainty traditionally remains a concern in Italy and weighs on ratings“, reads the considerations. According to the agency,” Mario Draghi’s new government offers welcome stability to manage the health crisis, accelerate the launch of vaccination campaigns, place Italy on a path of recovery and initiate important reforms ” .
The Draghi’s term of office, however, he points out, “could be limited, but it could have a time window to initiate measures that could strengthen Italy’s recovery, including major reforms aimed at boosting the country’s potential GDP. However, the reform effort will have to continue well beyond this government. ”
The new executive, “should govern at least until the election of the President of the Republic, which will take place at the beginning of 2022, and the election of Draghi as President is a possibility“, notes the rating agency.
Dbrs then notes that “the Italian banking system is in a better position than in the past, but an increase in NPLs is expected, albeit gradually “.
Italian banks, he continues in the analysis, “are stronger than in the past as both credit quality and capitalization have improved, but as the economic consequences of the pandemic worsen, the quality of assets will deteriorate. NPLpl, however, is expected to be manageable and below the post-crisis peak if economic growth picks up quickly.
Major past banking reforms have also led to the development of a secondary market which should facilitate the disposal of NPLs in the coming years “.
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