Pitch, Italy's Credit Rating Downgraded One Notch to BBB-... "Just Above Speculative Grade"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The international credit rating agency Fitch has downgraded Italy's sovereign credit rating from BBB to BBB-. BBB- is just one notch above speculative grade (junk bond).

According to Bloomberg News and others, Fitch explained the reason for the rating adjustment on the day, stating that it "reflected the significant impact of the novel coronavirus disease (COVID-19) on Italy's economy and public finances."

Initially, Fitch planned to decide Italy's sovereign credit rating on July 10, but due to rapidly changing circumstances, it found it necessary to take action outside the scheduled date and thus took this measure. Fitch forecasted that Italy's gross domestic product (GDP) would shrink by 8% this year, and the national debt-to-GDP ratio would increase by 20 percentage points to 156%. The fiscal deficit ratio is expected to be around 10% of GDP.

However, considering support from the European Union (EU) and the European Central Bank (ECB), Fitch changed Italy's rating outlook from 'negative' to 'stable.' Fitch added that the possibility of a downgrade remains if the government fails to implement economic plans to reduce the debt-to-GDP ratio.

Roberto Gualtieri, Italy's Minister of Economy, asserted regarding Fitch's credit rating adjustment that "Italy's economic fundamentals and public finances are solid." He said the decision did not take into account measures taken by the EU, related organizations, or member states, and particularly believed that the ECB's actions did not influence the decision.

Earlier, on the 24th, another credit rating agency, S&P, maintained Italy's sovereign credit rating at 'BBB' but presented a 'negative' outlook.

This content was produced with the assistance of AI translation services.