Fri, 19 Apr 2019

Moodys: Italy bonds now one step away from junk status

By Jay Jackson, Jamaica News
21 Oct 2018, 12 GMT+10

NEW YORK, New York Moodys has downgraded Italys sovereign debt rating once more, taking it a step closer to being rated junk.

The Italian governments significantly higher budget deficit targets for the next three years will keep its public debt at a high 130% of GDP, a level that makes Italy vulnerable to future economic shocks. Despite a short-lived boost to growth from fiscal stimulus, the governments economic plans will not allow it to tackle the countrys low growth, which will move back to the trend rate of 1% at best, Moodys in a statement said Friday.

The rating was lowered one notch to Baa3 from Baa2. The outlook going forward, said the ratings agency is stable.

Italy has budgeted for a deficit of 2.4% of GDP in 2019, triple what the previous estimate was.

With its economy floundering, Italy has insisted it needs to increase spending to get it moving again.

Most of the governments spending increases are structural in nature, implying that they will be difficult to reverse, Moodys said in its statement.

The economic plans of the government, while supportive of growth in the near term, do not amount to a coherent program of reforms that will lift Italys mediocre growth performance on a sustained basis.

The budget is subject to the approval of the European Commission which is in discussions with Italy over it.

Standard & Poors is due to review Italys rating on Friday (26 October 2018).

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