News ID: 271335
Published: 0858 GMT July 11, 2020

Italy gets respite from Fitch, retains investment-grade rating

Italy gets respite from Fitch, retains investment-grade rating
flipboard.com

Fitch Ratings affirmed Italy’s debt rating, giving the country a respite as the government struggles to stem the impact of the coronavirus on the economy.

The ratings company kept the nation unchanged at BBB-, the lowest investment grade, and maintained its stable outlook, flipboard.com reported.

Fitch unexpectedly downgraded Italy from BBB in April, citing “the significant impact of the global COVID-19 pandemic on Italy’s economy and the sovereign’s fiscal position.” It assumed that the coronavirus could be contained in the second half of this year, leading to a relatively strong economic recovery in 2021.

In a statement, the ratings company revised down its previous forecast of an eight percent contraction of gross domestic product in 2020, saying its latest prediction is a 9.5 percent contraction, followed by a recovery of 4.4 percent growth in 2021.

“Very high government debt and structurally weak economic growth will continue to weigh on the rating,” Fitch said.

Italy has been among the worst-hit by the pandemic, with more than 242,000 coronavirus cases and 34,000 COVID-linked deaths reported since the end of February. The pandemic and the two-month long business shutdown it triggered placed a renewed focus on Italy’s debt pile, which is set to rise well above 150 percent of GDP by the end of the year.

In March, the nation’s bond yields soared, spurring fears of a fresh sovereign debt crisis in the region, before the ECB stepped in with its pandemic asset-buying program.

Since then, Italy has spent €75 billion ($85 billion) in stimulus packages to boost the economy, and a further €20 billion will likely be needed. Earlier this week, the European Commission predicted an 11.2 percent economic slump for the country in 2020, the worst in the euro area.

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