Fitch Ratings has affirmed Italy’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘A-’ with a Negative Outlook. The short-term foreign currency IDR is affirmed at ‘F2′ and the Country Ceiling at ‘AAA’.
RATING RATIONALE
The affirmation of Italy’s sovereign ratings follows the conclusion of a formal review in line with the forward guidance provided by Fitch when it last reviewed Italy’s sovereign ratings on 19 July 2012. The affirmation of Italy’s sovereign ratings reflects the following key rating factors:
- Progress with fiscal consolidation and structural reform in 2012 broadly in line with Fitch’s expectation. The budget deficit this year will be below 3% of GDP, implying a primary surplus close to 3%. The budget deficit has gradually declined from a peak of 5.4% in 2009.
- Low contingent fiscal risks from the banking sector, an underlying budgetary position close to that necessary to stabilise the government debt to GDP ratio and a sustainable pension system which underpins confidence in the long-run solvency of the Italian state.
- The Italian sovereign has demonstrated its financing flexibility and resilience during the crisis reflecting a strong domestic investor base and average duration of 4.7 years. Moreover, the announcement of the ECB’s Outright Monetary Transaction (OMT) programme has materially eased stresses in European sovereign bonds, including for Italian debt.
- The rating remains supported by the relatively wealthy, high value-added and diverse economy with moderate levels of private sector indebtedness.
RATING OUTLOOK -NEGATIVE
