Standard & Poor’s (S&P) on Friday lowered Italy’s credit rating by one notch on concerns about weak growth and increasing debt while maintaining a stable outlook.
S&P dropped Italy’s long and short-term sovereign credit rating to “BBB-/A-3” from “BBB/A-2,” the ratings agency said in a statement.
The agency revised its GDP growth estimates for Italy over the 2014-to-2017 forecast horizon down to 0.5 percent and 1.2 percent, respectively, from 1 percent and 1.9 percent.
“Persistently low inflation and a difficult business environment continue to weigh on Italy’s economic prospects,” S&P said.
S&P also revised its estimate of Italian public debt to an increase of 80 billion euros (US$98.3 billion) by the end of 2017, or 4.9 percent of estimated GDP for this year.
The new rating is the weakest note of the investment category, but Italy was not at risk of falling into the speculative category in the short or medium term as its outlook remains “stable.”
“The stable outlook reflects our expectation that the government will gradually implement comprehensive and potentially growth-enhancing structural and budgetary reforms,” S&P said.
Meanwhile, the ratings agency raised Ireland’s credit rating to “A” on Friday, citing the country’s improved economic growth forecast and its repayment of debt.
The move to “A” from “A-” was the second time in six months that the ratings agency has upgraded Ireland, which was stripped of its maximum “AAA” rating amid the financial crisis in 2009 and a subsequent EU-IMF bailout.
“The upgrade reflects our view of Ireland’s solid economic growth prospects, which we expect to underpin further improvements in the government’s budgetary position,” S&P’s said in a statement.
Now the fastest growing in the eurozone, Ireland’s economy is forecast to grow almost 5 percent this year, a significant rebound that contrasts with sluggish growth in much of the bloc.
S&P forecast that Ireland would grow an average of 3.7 percent between this year and 2016.
It forecast unemployment would fall to 9 percent in 2017, the lowest level since 2008, and said the labor market was flexible due to emigration and wage adjustments.
Irish Minister for Finance Michael Noonan welcomed the news, which came ahead of meetings with investors in China, saying the upgrades “reopened new markets to us across Asia.”
“The Standard and Poor’s upgrade is further evidence that our economic recovery has firmly taken hold thanks to the policies pursued by this government and the commitment of the Irish people,” Noonan said.
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