Italy is currently the only country with a Baa3 rating and a negative outlook, write Moody’s analysts Kelvin Dalrymple and Scott Phillips. “Slow growth and higher borrowing costs could further weaken Italy’s fiscal position.” According to analysts, Italy is one step away from junk status.
However, credit rating agencies S&P and Fitch are less negative about Italy. “Italy’s macroeconomic outlook for 2023-24 does not look as bleak as initially expected and Meloni has so far avoided a strong confrontation with the EU,” said one analyst.
According to Moody’s, Italy is particularly at “greater risk” in implementing crucial reforms in the country. Any downgrade to junk, analysts say, would not only hurt national pride but also make government bonds less attractive to investors.