Scope takes no action on the Republic of Italy
      FRIDAY, 20/01/2023 - Scope Ratings GmbH
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      Scope takes no action on the Republic of Italy

      Monitoring review announcement

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website. 

      Scope completed the monitoring review of the Republic of Italy (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB+/Stable; short-term local- and foreign-currency issuer rating: S-2/Stable) on 16 January 2023.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on

      Key rating factors

      For the updated Rating Report accompanying this review, click here.

      Italy’s BBB+/Stable rating benefits from i) supportive European monetary and fiscal policy frameworks under the EU and euro area institutional architecture; ii) the Italian economy’s size (EUR 1.8trn of GDP) and diversification, which, together with a high per-capita income of around EUR 30,000, strong external sector, moderate non-financial private sector debt and financial system buffers, supports economic resilience; and iii) a favourable public debt structure with an average cost of funding of around 2.9% and an average debt maturity of around seven years. Italy’s significant economic, financial market and political relevance as a founding member of the EU further underpins Scope’s expectation of exceptional support from European institutions under stressed scenarios. This includes the ECB’s flexible reinvestment of securities purchased via its asset purchase programmes and the Transmission Protection Instrument.

      Rating challenges include i) weak public finances, given high government debt of around 145% of GDP and elevated annual funding needs, including bills, of 25%-30% of GDP, expected to persist into the medium term; ii) structural bottlenecks, which hinder medium-term growth by limiting productivity growth and creating labour market rigidities that curb employment growth and labour force participation; iii) weak demographics, with an ageing and declining working population that will continue to weigh on government finances and growth; and iv) a fragmented political environment weighing on economic reform momentum.

      Scope expects economic growth of 0.5% this year, after an expected 3.7% in 2022, and of 1.5% in 2024. Following the 2023 Budget Bill, the budget deficit is forecast to decline this year only modestly to 4.8% of GDP from an expected 5.2% of GDP in 2022. Still, the primary balance should gradually improve and turn into a 1% of GDP surplus by 2026. However, the rising interest burden, which Scope expects to exceed 4% of GDP, will keep the headline deficit close or above 3% of GDP over the medium term.

      The Stable Outlook reflects Scope’s opinion that risks to the credit ratings over the next 12 to 18 months are broadly balanced.

      The ratings/Outlooks could be upgraded if there is, individually or collectively: i) a firm downward trajectory in the debt-to-GDP ratio; and/or ii) improved medium-term economic growth resulting from an effective implementation of public investments and structural reforms on which EU fund disbursements are conditioned.

      Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) support from European institutions weakened, increasing refinancing risk on Italy’s high public debt stock; ii) the medium-term growth outlook weakened due to delays in public investment and/or reforms under the country’s recovery and resilience programme; and/or iii) the fiscal outlook deteriorated, resulting in slower fiscal consolidation and an associated slower decline, or even reversal, in the debt-to-GDP ratio.

      The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Rating Methodology, 27 September 2022) is available on
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst: Alvise Lennkh-Yunus, Executive Director.

      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

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