Fitch confirms Italy's BBB+ rating with stable outlook

The Fitch agency confirms Italy's BBB+ rating with a stable outlook. This is what we read in a note.

The judgement

The opinion on Italy is "supported by a large economy, increasingly diversified and with high added value, as well as by the advantages in terms of institutional and financial stability deriving from membership of the EU and the euro area. Added to this are high levels of wealth and relatively solid governance indicators. These strengths are counterbalanced by a very high public debt burden and limited medium-term growth prospects, factors that restrict budgetary flexibility and limit the capacity to reduce the debt,” the agency writes.

The note

Fitch estimates an average GDP of 0.8% for Italy in 2026-28, thanks to an economy that has shown resilience in the face of external shocks, while the "very high" level of public debt remains the main rating constraint. This year's growth will be supported by solid public investment, resilient private consumption and diversified exports. From 2027, "we expect growth to slow as inflation impacts consumption and support from the Ngeu program runs out, although investment is set to remain a driver of growth." The medium-term prospects are conditioned by demographic and productivity challenges, but "recent investments and reforms offer room for improvement", reads the note confirming the ratings. Fitch expects the debt-to-GDP ratio to peak at 138.2% in 2026, compared to an average of 57% for 'BBB' rated countries, and then gradually decline starting in 2027. The debt dynamic "is supported by steady primary surpluses and moderate nominal growth, while adjustments linked to previous tax credit programs are expected to ease from 2028".

The labor market continues to perform "excellently, supporting growth and public finances", Fitch says, underlining that the increase "in employment has acted as a shock absorber against demographic challenges". "Inflation has started to rise again, driven by the increase in energy prices", adds Fitch, forecasting a "modest improvement in the budget deficit in 2026 to 2.9%, thanks to prudent spending management and good revenue performance, favored by the solidity of the labor market". "The measures adopted to offset the higher energy costs were contained and had a neutral impact on the budget. Attention to public investments remains central with the aim of maintaining momentum in the medium term", highlights Fitch