Overview
- Moody’s kept Italy’s long-term issuer rating at Baa2 with a stable outlook in its periodic review and adjusted 2026 forecasts due to the Middle East conflict.
- It now projects real GDP growth of 0.7% in 2026 and inflation at 2.1%, and it expects a modest pickup to about 0.8% growth in 2027 with inflation near 2.0%.
- The agency says Italy’s very high public debt, at 137.1% of GDP, limits fiscal flexibility and heightens sensitivity to higher borrowing costs.
- Recent data tracked Moody’s expectations: unemployment fell to 6.1% in 2025 and the deficit narrowed to 3.1% of GDP, though debt rose in part from residual superbonus tax-credit payments.
- Moody’s warns a prolonged conflict could weaken growth because Italy imports significant energy from the Gulf, which makes reforms that lift productivity and growth more urgent to cut debt risks.