S&P Global Ratings Analyzed the Path that Italy is Facing…
S&P Global Ratings, specifying that the ambitious reform agenda in the pipeline will not have an immediate impact on its vision of Italy’s credit quality (BBB / Stable / A-2). “The new Italian government of” national unity “, led by former ECB president Mario Draghi, has said that it will focus on the response to the pandemic and on supporting the economic recovery – reads the bulletin -. The government, a coalition of six parties, will also begin to draw up a strategic plan to invest the approximately 200 billion euro stake in the EU Next Generation fund. It is expected that the new government, which represents almost 90% of parliamentary seats, a larger majority than any other post-war government, will be able to reform the Italian economy, the fiscal framework and the judiciary “.
The agency then pointed out that “Draghi has only two years to achieve his goals. Italy‘s long-term structural challenges include an aging population, highly regulated product and labor markets, large economic and educational disparities between the north and south, and poor results in attracting investment from the rest of the country. world. The new government will also have to closely monitor the health of the financial sector, given its low profitability and high exposure to small and medium-sized enterprises, hit hard by the pandemic ”.
In focus, anti-Covid aid and the possible effects on Italy’s debt “Since last year, the Italian government has agreed to issue guarantees of up to 25% of GDP to support the liquidity of families and businesses. If these guarantees were to be requested, the public debt would increase beyond our current expectations, “the rating agency specified.
S&P also said it expects an economic rebound in Italy of 5.3% in 2021, assuming the health situation normalizes and fiscal and monetary stimuli remain in place. In 2020, GDP shrank 8.8% as COVID-19 restrictions weighed on private consumption and investment. Yet Italy is probably still in a slightly better position than some of its neighbors, thanks to its relatively large manufacturing sector, which has been less affected than the services sector by the second bloc. If Italy, destined to be the largest beneficiary of the EU Fund, effectively uses its share, this could stimulate public investments, which were about 30% lower than before the last financial crisis “, reads bulletin.