Italy securing an upgrade in Fitch rating owing to strong fiscal performance and political stability under Meloni's leadership
Italy's Credit Rating Upgraded by Fitch to BBB
In a significant development, Fitch Ratings has upgraded Italy's credit rating to BBB+, marking a positive shift in the country's economic outlook. This decision follows a series of upgrades last week for Spain and Portugal.
The move by Fitch comes as Italy's 2024 budget deficit is expected to be 3.4% of GDP, which falls within the government's 3.8% target. Moreover, the deficit for this year is forecasted to be 3.1% of GDP, based on solid tax revenue performance and a widening tax base.
Defence spending in Italy is on track to reach 2% of GDP in 2025, primarily due to a reclassification of its spending. However, Fitch expects limited additional expenditure on defence in 2026-2027.
The upgrade reflects Italy's political stability and improving public finances under the government of Prime Minister Giorgia Meloni. Economy Minister Giancarlo Giorgetti suggests that the budget deficit could fall below the European Union's 3% ceiling this year, a year ahead of schedule.
Improved labor market conditions and rising tax compliance are contributing to the tax revenue performance. The new multi-year planning process in Italy serves as an important anchor in sustaining fiscal prudence.
Fitch maintained its stable outlook for Italy, citing the current policy framework and stable political backdrop in the country as conducive to meeting its targets. The agency also highlighted the government's commitment to fiscal discipline and credible economic policies.
Giorgetti stated that Italy is back on the right track after the credit rating upgrade, while Prime Minister Giorgia Meloni commented that the upgrade is a clear sign of confidence from international markets.
Fitch's review of Italy will be followed by reviews from S&P Global, Moody's, Morningstar DBRS, and Scope Ratings in the coming weeks. This series of reviews could potentially lead to further upgrades for Italy.
In contrast, France, the bloc's second-biggest economy, is in turmoil due to frequent changes of minority governments trying to pass deficit-narrowing budgets. This contrast in political fortunes highlights the positive shift in Italy's economic landscape.
