Moody’s Investors Service downgraded Italy’s outlook to negative, citing accumulated risks ranging from Russia’s war in Ukraine to the departure of Prime Minister Mario Draghi, Bloomberg reported.
The European country’s credit rating, which is rated Baa3 by Moody’s, is under pressure from heightened sovereign risk that could hinder structural and structural reforms, including those included in Italy’s National Recovery and Resilience Plan, according to analysts Sarah Carlson and Alejandro Olivo;
“Risks to Italy’s credit profile have accumulated more recently due to the economic impact of Russia’s invasion of Ukraine and domestic political developments, which could have significant credit implications,” the analysts wrote in a note on Friday.
“Significant dependence on natural gas for its energy exposes Italy to further cuts in supply from Russia, as well as higher energy prices.”
Moody’s also cited a possible deterioration in the country’s public finance outlook due to low growth, expensive borrowing costs and potentially weaker fiscal discipline. Snap elections after Draghi steps down in July are expected to increase uncertainty.
S&P downgraded Italy’s outlook after Draghi’s departure.
Italy is rated BBB by both Fitch Ratings and S&P Global Ratings. S&P cut its outlook for Italy in late July.