Moody’s judgement will be the most sensitive in terms of risk. Its rating is already at the lowest rung of its investment grade ladder and, contrary to the others, it already changed its outlook for the country to negative following the collapse of the Draghi government in August 2022. The S&P judgement provides an indication of what other rating agencies might do. At this stage, we believe they are more likely to express a judgement on Italy’s outlook, rather than make a rating change.

Prospects for the Italian economy: lacklustre growth in 2024, but no recession.
For 2023 we expect growth will align with government estimates, slowing to 0.8% from 3.8% in 2022. This deceleration is primarily due to a slowdown in personal consumption expenditure, as the drivers of domestic demand are constrained by higher interest rates and prices. Although price rises are decelerating, they continue to erode real income, as wage adjustments haven’t kept apace. Decelerating inflation and reasonably healthy employment growth should help cushion consumption, which we expect to slow but not contract altogether.

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