Fitch downgrades Italy’s credit rating to one notch above junk

Italy’s credit rating has been downgraded to one notch above junk level by Fitch ratings agency as the coronavirus hurts Italy’s already fragile economy further.

Fitch downgraded Italy’s credit rating from ‘BBB’ to ‘BBB-’, just one level above its junk rating, reflecting increasing doubts around Italy’s credit-worthiness as it tries to recover from the economic and societal damage inflicted by the coronavirus.

Fitch forecast that Italy’s economy will contract by 8% in 2020 and said the risks to this baseline forecast are tilted to the downside, as it assumes that the coronavirus can be contained in the second half of the year, leading to a relatively strong economic recovery in 2021.

The ratings agency believes that Italy’s debt to GDP ratio will increase by around 20 percentage points this year to 156 percent of GDP by at the end of 2020. Italy is one of the most indebted nations in the world after Japan and Greece.