WASHINGTON, April 25 ― S&P announced yesterday it was maintaining the debt rating for Italy at BBB amid budget pressures from coronavirus lockdowns and financing backstops provided by the European Central Bank.
However, the outlook is negative, and S&P said it could lower the grade if the government debt situation deteriorates.
Rome launched a host of stimulus measures to address the economic fallout from the lockdown as well as providing support to businesses, which taken together “are likely to push Italy's general government deficit to an estimated 6.3 per cent of GDP this year.”
With the economy this year expected to contract nearly 10 per cent, “gross general government debt will increase to 153 per cent of GDP by end-2020,” the agency said in a statement.
“We expect that most of the Italian sovereign debt newly created this year as a consequence of the pandemic will be purchased by the ECB,” including the €750 billion (RM3.5 trillion) Pandemic Emergency Purchase Programme (PEPP), the ratings agency said.
“At present, the ECB's current financing backstop enables Italy to refinance its debt at real interest rates of around 0 per cent.”
But if there is a “marked deterioration” in borrowing conditions “for example due to insufficiently supportive policy measures at the eurozone level,” that could lead to a ratings downgrade. ― AFP
