Fitch Downgrades Italy's Ratings To "BBB-" Due To Coronavirus
Fitch has downgraded Italy's long-term foreign and local currency Issuer Default Ratings (IDRs) from "BBB" to "BBB-," the lower tier of investment-grade ratings. The Rating Outlook is "stable," according to a press release.
Analysts of the Agency explained the rating decision with the consequences of the COVID-19 pandemic for the economy and budget of Italy.
Fitch still forecasts that Italy's GDP will shrink by 8% in 2020, but warns that the estimate may be worsened. According to the Agency's basic forecast, the spread of the coronavirus will be brought under control in the second half of the year, and, thanks to this, the Italian economy will rapidly gain growth in 2021.
"In the event of a second wave of coronavirus and the resumption of widespread knockdowns, the dynamics of Italian GDP will be worse than forecasts in 2020 and 2021," the press release said.
Fitch analysts expect Italy's public debt to increase to 156% of GDP by the end of 2020, while the average debt level among the "BBB" rating countries is 36% of GDP.
"According to our forecasts, Italy's public debt will remain at this very high level in the medium term, which underscores the risks associated with excessive debt," the agency said in a statement.
The "stable" rating Outlook reflects the opinion of analysts that the current asset purchase program by the European Central Bank will help Italy implement measures to support the economy in response to the coronavirus pandemic, as well as reduce risks in terms of refinancing by maintaining a very low cost of borrowing for the country, at least in the near future.
According to the latest data, 201,505 people were infected with the coronavirus in Italy, and 27,359 people died.