Moody's lifts outlook on Italy to 'positive' as finances improve

(Reuters) -Credit ratings agency Moody's on Friday upgraded its outlook on Italy to "positive", in a boost to Prime Minister Giorgia Meloni's efforts to tackle strains on the country's finances and manage debt.

Moody's also maintained its "Baa3" rating on Italy and said its update in outlook from "stable" followed a "better-than-expected" fiscal performance last year and a "stable" political environment, which would support the Italian government's plans.

"The positive outlook is also supported by a robust labour market, sound household and corporate balance sheets and a healthy banking sector," Moody's said in its report.

Italy's Economy Minister Giancarlo Giorgetti welcomed Moody's outlook revision.

"Moody's evaluation is the result of a serious and silent work we have been carrying out since the beginning of the government," Giorgetti said in a statement.

Last month, rival ratings agency S&P raised its rating on Italy to "BBB+" from "BBB", in a surprise move that came just days after Meloni's government slashed its forecast for 2025 GDP growth to 0.6% from 1.2%.

Despite the weak growth outlook, clouded by uncertainty over U.S. trade tariffs, Rome confirmed its previous budget deficit commitments, estimating a deficit of 3.3% of GDP this year and 2.8% in 2026.

Italy's public debt, proportionally the second-highest in the euro zone after Greece's, is projected to be 136.6% of GDP this year, marginally down from the 136.9% target set in September.

(Reporting by Pushkala Aripaka in Bengaluru and Gavin Jones in Rome; Editing by Mohammed Safi Shamsi)