Italy may receive its first Moody’s credit rating upgrade in over two decades, reflecting growing confidence in the fiscal health of the eurozone’s third-largest economy. Analysts cite stronger-than-expected budget performance and a stable political environment as key drivers behind the potential move.
Moody’s currently rates Italy at Baa3 with a positive outlook, the lowest rung of investment grade. The rating has remained unchanged since a downgrade in October 2018, and the last upgrade was in May 2002, when Italy’s rating moved from Aa3 to Aa2, News.Az reports, citing Reuters.
The government of Prime Minister Giorgia Meloni has cut Italy’s 2025 budget deficit target to 3% of GDP, meeting the European Union ceiling a year ahead of schedule thanks to higher tax revenues and lower debt servicing costs. Citi analysts noted that Italy’s fiscal performance continues to “surprise positively,” supported by GDP growth, fiscal consolidation, and EU-funded support.
A Moody’s upgrade would complement recent rating improvements from other agencies. Fitch raised Italy to BBB+, DBRS lifted it to A (low), and Scope moved its outlook to positive from stable. S&P Global has maintained Italy at BBB+ with a stable outlook following a recent upgrade six months ago.
Italian government bonds have rallied on the optimism, with the spread between 10-year BTPs and German Bunds narrowing to around 75 basis points, near a 15-year low, signaling strong investor confidence.
Despite these gains, challenges remain. Italy’s aging population, high debt levels, and stagnant economic growth—with GDP stagnating in Q3 2025—pose long-term risks. Full-year growth forecasts have been revised down to 0.5%, compared to 0.7% last year.
Analysts, however, emphasize that fiscal discipline and political stability under Meloni’s government continue to outweigh these concerns, making a Moody’s upgrade a likely signal of Italy’s improved creditworthiness in the global market.