The S&P agency surprisingly announced in the evening the downward revision of Italy’s outlook to ‘stable’ from ‘positive’, confirming the rating at the ‘BBB’ level.
In a note S&P affirms that «on 21 July the president of the republic Sergio Mattarella dissolved parliament after the resignation of Prime Minister Mario Draghi. The elections are scheduled for 25 September. These developments could shift the focus away from key reforms and further weigh on confidence and growth at a time of high uncertainty and rising inflation ”.
“The stable outlook – continues the agency – reflects the risks that a slowdown or reversal of reforms” could have for the Italian economy and public accounts. “The revision also reflects high inflation and risks to Italy’s energy supplies,” says S&P. “We could raise the rating if the next government continues along the path of reforms and continues with the gradual fiscal consolidation. Ratings could come under pressure if the Italian economy slides into a protracted recession. A prolonged inflationary shock, together with weak growth, could represent a risk for Italian public finances and, consequently, for ratings, ”notes S&P.
A complete stop of gas flows from Russia later this year “cannot be ruled out”. In the event that this happens, Italy – says the agency – would record negative GDP growth in 2023 and 2024.