ROMA – Rating unchanged for Italy to ‘BBB’ as rated by Fitch, which also keeps the outlook stable and raises growth estimates for this year to 1.2% from 0.5%. The revision, explains Fitch, is due in the meantime to the good data of the first quarter, and then “to the significant slowdown of the natural gas crisis in Europe, to a strong rebound in tourism and to the strengthening of global demand”. For 2024, the growth forecast is 0.8%, slowing instead compared to the 1.3% expected in March, also due to “the more restrictive financing conditions”.
Fitch also notes that higher investments have supported Italy’s potential growth rate. Inflation, continues the agency’s analysis, remains high, but is nonetheless declining. The forecast is that it will fall to an average of 7.2% in 2023 and 3.5% in 2024, from 8.7% in 2022, thanks to the normalization of energy prices. Appreciation also for the Italian labor market, considered less rigid than in other large EU economies, with “salary dynamics are more contained”.
Def, Bank of Italy: “More favorable economic situation than expected”. Giorgetti: “New aid is coming for low-medium incomes”
The “confidence” of the markets, after the confirmation of the rating by Fitch, “means that the government can continue the policy it has done to date creating fiscal spaces to help families as we did with the decree of May 1″, commented the Minister of Economy Giancarlo Giorgetti on the sidelines of the G7 meeting in Nigata, Japan, emphasizing how the “serious work” done by the executive up to this point has been acknowledged.
And the governor again from the G7 Ignatius Visco spoke about interest rates and banks. “In the seven times that we have increased rates, we have gone from an increase of 75 points to one of 50 and then 25. This is the trend with respect to size but the direction continues to be that against the risks of inflation spreading“he said at the end of the G7 financial meeting in Japan.
Visco explained that “monetary policy needs time to propagate” and that “the transmission is taking place as expected. Then we’ll see”. On the banks, however, he underlined that “the risks of the real economy are beginning to be felt and the banks are more cautious at a European level, not just in Italy. The governor also addressed geopolitical issues. “The tension with the Chinese he has reasons but it requires a considerable diplomatic effort, both economic diplomacy and tout court, because we must keep the dialogue open and deal with the problems that affect us together”.
Going back to Fitch, the rating agency also expects a marginal decrease in public debt, which “will benefit from the positive differential between growth and interest rates in the medium term, bringing the debt burden on a gradually downward trajectory”. The forecast is therefore that the debt/GDP ratio will fall to 142.3% in 2024, even if “a significantly larger fiscal adjustment is suggested to keep the debt on a downward path”.
On the political front, American analysts see no risk for the stability of the government which enjoys “a stable majority in parliament and strong support among voters. In light of this and the fragmented opposition, we believe it is possible for the government to last full term”. Emphasizing that “political stability creates space for the government for a medium-term strategy”. Either way, Fitch warns, the coalition could face pressure to deliver on spending commitments.