Rome – Italy retains the confidence of the international agency Standard & Poor’s, but has not secured the upgrade that would have brought the national public debt back into the A category.
The US agency has confirmed its BBB+ rating on long-term public debt and its A-2 rating on short-term public debt. The outlook remains positive, meaning there is a prospect of a possible upgrade in the coming months.
Our country, therefore, remains a reliable borrower. Economy Minister Giancarlo Giorgetti said: “The positive outlook from S&P is welcome; it is further confirmation that we are on the right track. In such difficult times, such confirmation represents a success.”
Energy
Looking ahead, “persistent uncertainty surrounding international trade and energy prices” remains. Nevertheless, the Italian private sector, characterised by a diversified economy, will continue to generate current account surpluses, albeit at a slower pace.”
“This will strengthen Italy’s position as a net foreign creditor vis-à-vis its international trading partners. At the same time, the public sector will gradually reduce its net debt.”
The two scenarios
The credit rating agency does not rule out a negative scenario: “We may consider downgrading the ratings should Italy’s economic, external financial or fiscal conditions deteriorate significantly compared with our forecasts”.
“This could occur, for example, if uncertainty surrounding international trade or energy prices were to significantly undermine consumer and business confidence, as well as the country’s external financial position and public finances.”
However, S&P also outlines a positive scenario: “We could raise the ratings if Italy were to continue strengthening its external financial position, if the economy were to demonstrate a greater ability to withstand trade and energy shocks, or if the country were to succeed in reducing the public debt-to-GDP ratio”.
Defence
Public debt has been, and continues to be, a drag on the development of the national economy. The agency writes: “The rise in spending on energy, defence and interest payments is likely to push Italy’s 2027 public deficit above previous estimates. However, we expect public debt to start falling from 2028.”
Standard & Poor’s analysts are aware that 2027 will be a general election year. They have therefore factored in that the government will face “further difficulties in managing public debt in the short term”.
“We expect, however, that after the elections, Italy will resume its path towards fiscal consolidation.” Furthermore, “we expect cash outflows linked to superbonus (home renovation tax credit) credits to decline in 2028 and 2029; these do not directly affect the accrual-based deficit, although the government’s proposal to extend the repayment period could alter the pace of this reduction”.
Low productivity
In addition to public debt, low productivity is a burden on our country. In recent months, we have benefited from “the economic stimulus provided by the European Next Generation EU programme”.
“However, when these stimulus measures come to an end, between 2026 and 2027, the structural problems of the Italian economy – such as unfavourable demographic trends and modest productivity – will resurface with full force.”