Moody's upgrades Italy's ratings to Baa2, changes outlook to stable

This is the first upgrade for the country by Moody’s in over 23 years.

The domestic-currency commercial paper rating was upgraded to P-2 from P-3, and the foreign-currency other short term rating to (P)P-2 from (P)P-3. The outlook was changed to stable from positive.

“The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP),” the rating agency said in a release.

It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, Moody’s expect s Italy's high government debt burden will gradually decline from 2027 onwards.

Reforms to improve public sector efficiency and the broader business environment could lead to a more substantial improvement in Italy's growth outlook, with positive repercussions for government finances.

On the downside, the decline in Italy's high debt burden is reliant on relatively robust gross domestic product (GDP) growth and rising primary fiscal surpluses.

This means that slower growth or less pronounced fiscal consolidation than Moody’s currently expects would derail its projections of a declining debt burden.

It has also raised Italy's long-term local and foreign-currency bond country ceilings to Aa2 from Aa3.

ALCHEMPro News Desk (DS)