Italy’s Economy Resilient Despite Political Challenges and High Public Debt, DBRS Morningstar Confirms BBB Rating with Stable Trend

The DBRS Morningstar agency has confirmed Italy’s BBB (high) rating with a stable trend, indicating that the risks for credit ratings are balanced. Despite the effects of a more restrictive monetary policy and a weaker external context, economic growth is expected to gradually resume as household purchasing power and financial and external conditions improve.

Italy’s fiscal deficit in 2023 was higher than expected at 7.4% of GDP, largely due to tax credits such as the Superbonus. However, Italy’s public debt-to-GDP ratio fell faster than anticipated to 137.3% of GDP in 2023 thanks to nominal GDP growth. While the fiscal impact of these incentives is expected to decrease in the future, it will lead to increased financial needs and a rise in Italy’s public debt/GDP ratio in the coming years.

The economy benefits from diversification and resilience in the manufacturing sector, as well as a positive net international investment position. Although Italy’s public debt level remains high and potential GDP growth is weak, the country’s banking system is in a stronger position in terms of capitalization and net impaired assets. However, Italy’s political context remains constrained by hindering government stability and its ability to address economic challenges.