Fitch Ratings agency says the downgrade reflects the significant impact of the COVID-19 pandemic on Italy’s economy and fiscal position
- expects Italy’s govmt debt to GDP ratio to increase this year, by around 20%
- Fitch forecasts an 8% GDP contraction in 2020
- says Italy’s gross general government debt to GDP ratio will increase by around 20pp this year
- stable outlook partly reflects view that ECB’s net asset purchases will facilitate Italy’s substantial fiscal response to covid-19 pandemic
- downward pressure on Italy’s rating could resume if government does not implement credible economic growth & fiscal strategy
- says recession & economic policy response to covid-19 pandemic will result in sizeable deterioration of Italy’s budget balance this year
This is a negative input for euro
Link to Fitch for more … note this:
- In accordance with Fitch’s policies, the issuer appealed and provided additional information to Fitch that resulted in a rating action that is different than the original rating committee outcome.
Huh … reading between the lines on this it could have been a worse outcome for Italy?
Note – S&P recently affirmed Italy at BBB/A-2 with an outlook negative.
And – the ECB will still accept Italy debt as collateral given their recent changes to accept debt which was eligible on April 7th.