Italy’s credit rating was cut closer to junk territory on Friday by analysts at Fitch, who cited “weak economic growth” and the country’s “persistent track record of fiscal slippage”.
Fitch reduced the rating to “BBB” from “BBB+”, leaving it just two notches above speculative-grade.
“Italy’s persistent track record of fiscal slippage, back-loading of consolidation, weak economic growth, and resulting failure to bring down the very high level of general government debt has left it more exposed to potential adverse shocks,” the ratings group said.
Fitch added that Italy has “missed successive targets” for its debt-to-gross domestic product ratio, which rose by 0.5 percentage points to 132.6 per cent last year.
At the same time, “banking sector weakness adds to downside risks to the economy and public finances, and plans are being put in place for sovereign recapitalisations in three banks,” Fitch noted.
Italy’s economy grew by 0.9 per cent last year, and Fitch expects this year’s growth pace to match that sluggish level. By 2018, Fitch expects growth to rise to 1 per cent, “which would leave real GDP still more than 5 per cent below the 2007 level”.