Scope, Italia rating remains BBB+/Positive, GDP growth forecast 2026 at 0.5%

Scope completed the monitoring review for the Italian Republic, maintaining the issuer's long-term rating in local and foreign currency and senior unsecured debt at BBB+/Positive and the issuer's short-term rating in local and foreign currency at S-2/Positive).

According to the agency, the Italian Republic's BBB+ rating is supported by a number of strengths: (i) European monetary and fiscal policy frameworks anchored in the institutional architecture of the EU and the euro area; (ii) the large size of the Italian economy (GDP of EUR 2.3 trillion) and its diversification, coupled with a relatively high per capita income of about $43.300, a robust external sector, moderate non-financial private sector debt and financial system reserves, which support economic resilience; and iii) a favourable public debt structure with an average funding cost of about 3.0% and an average debt maturity of about seven years.

The main credit challenges are: (i) high public debt and considerable financing needs, which are expected to remain high in the long term; (ii) weak long-term growth; and (iii) unfavourable demographic dynamics, including a shrinking working-age population, which weigh on productivity and fiscal sustainability.

The agency expects the disruptions resulting from the conflict in the Middle East to be contained and short-lived, with limited short-term effects on Italy's economic performance, provided the crisis is resolved soon. Underlying fundamentals are expected to remain solid. Scope expects Italy's GDP to grow by 0.5% in 2026, broadly in line with the previous year, supported by a resilient labour market and government support measures. Despite the decline in real purchasing power due to high inflation, private consumption is expected to continue to expand, while investment, although business confidence has weakened, will continue to benefit from increased spending under the Recovery and Resilience Plan (RRP).

Italia remains among the best-performing EU countries in terms of Pnrr fund absorption, with residual disbursements amounting to around 20% of the total allocation. Looking ahead, the slowdown in inflation and the reduction in geopolitical tensions should support a modest acceleration in GDP growth, which will reach 0.6% and 0.9% in 2027 and 2028 respectively.