Fitch Ratings confirmed Italy’s rating at ‘BBB- with a stable outlook. This was announced by the international rating agency. The pandemic, the agency underlines, “continues to have a significant negative impact on the Italian economy and public finances”. The rating, Fitch notes, “is affected by a very high public debt and structurally weak economic growth. The rating is supported by the fact that Italy has a diversified and high value-added economy and by belonging to the Eurozone, by GDP per capita, by moderate indebtedness in the private sector and a surplus on current account “. Furthermore, Italy “also benefits from ECB programs”.
The Covid-19 pandemic, notes Fitch, “proved to be a prolonged shock for the Italian economy and public finances and similar to many European countries. The acceleration of the vaccination program, the sharp decline in new cases of Covid -19, together with the reopening of the vast majority of economic activities in May, pave the way for a rapid recovery in economic activity in the second half of 2021 “.
Italy, underlines the rating agency, “will also benefit from the investment stimulus provided by the funds of the Next Generation Eu (NGEU)”. Achieving lasting growth effects through the NGEU “will depend on Italy’s ability to use funds effectively and the government’s ability to implement targeted reforms”.
Fitch expects GDP growth of 4.8% in 2021, driven by a strong rebound in the second quarter of the year and 4.3% in 2022.
Fitch in his analysis notes that the government led by Prime Minister Mario Draghi “could last until March 2023, when the next national elections are scheduled, and at least until the presidential elections scheduled for February 2022. The government intends to adopt reforms focused on the public administration, justice and competition as part of the NRP. Reform of the tax system is also part of the NRP’s agenda, but could take longer, with the government aiming for the second half of 2021. The reform efforts of the previous governments in these sectors have stopped due to the unpopularity of the reforms. The majority of the government is large, but it receives the support of ideologically different parties, which can complicate the passage of the reforms. “