Italy stands out to Moody’s as only country risking junk

Italy stands out to Moody’s as only country risking junk Italy is the only country that could lose its investment-grade rating at Moody’s Investors Service
Finance
April 25, 2023 13:51
Italy stands out to Moody’s as only country risking junk

Italy is the only country that could lose its investment-grade rating at Moody’s Investors Service, the company said, Report informs referring to Bloomberg.

In a report surveying how nations have dealt with downgrades to junk over the past three decades, the euro zone’s third-biggest economy was highlighted as a prominent candidate for such a status adjustment. Moody’s didn’t give a view on the likelihood of that happening.

“Italy is currently the only Baa3-rated sovereign with a negative outlook,” wrote analysts including Kelvin Dalrymple and Scott Phillips. “Sluggish growth and higher funding costs may further weaken Italy’s fiscal position.”

Moody’s, whose next credit assessment on Italy is due May 19, rates it at Baa3, one notch above junk. The outlook on that has been negative since August - a notably pessimistic appraisal of the country whose fractious coalition led by premier Giorgia Meloni took office almost exactly six months ago.

By contrast, S&P Global Ratings just last week reaffirmed its own view of Italy at a level one notch higher - BBB with a stable outlook. Fitch Ratings has a similar view and will release its next assessment on the country on May 12.

“The Italian macro 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 Evelyne Gomez-Liechti, a rates strategist at Mizuho International Plc. “But the widening tone is likely to remain until Moody’s and Fitch report their decisions.”

Moody’s analysts wrote that Italy faces “heightened risks” around the implementation of crucial reforms aimed at reinvigorating its growth potential, citing measures including those linked to the receipt of European Union Recovery Fund money.

Any eventual downgrade to junk would hit national pride, and bring the country into unchartered territory with a designation that makes its bonds less attractive to investors.

Orphus sistemi