S&P Holds Italy at BBB+ With Positive Outlook, Keeping an Upgrade to 'A' Within Reach

On the evening of Thursday, November 13, S&P Global Ratings left Italy's sovereign rating where it was: BBB+ for long-term debt and A-2 for short-term, in both foreign and local currency. The outlook stayed positive. That keeps open a route back to the "A" category, a level Rome has not held since March 2013.

The agency's case rests largely on Italy's external position. It describes a diversified, export-oriented private productive base that should keep producing current account surpluses even with uncertain international trade and high energy prices. The result, according to the note, is a gradually stronger net creditor position toward the rest of the world. The public sector is expected to reduce its net borrowing, and public debt can fall slowly through 2028.

US tariffs figure prominently. S&P says Italy's resilience owes something to the strength of goods exports, which have offset the tariff measures introduced by Washington. Net external debt, the indicator the agency prefers for gauging exposure to the rest of the world, is projected to drop below 150% of current account receipts by 2028. That holds even though higher oil imports will weaken the surplus in 2026. Recurring surpluses have been a feature of Italy since the 2013 sovereign debt crisis and, though moderating because of energy costs and Asian competition, are expected to continue.

The public finances are the harder part. S&P expects debt stabilization to be less pronounced than in earlier forecasts, partly because the government has announced a higher deficit target for 2027, an election year, to pay for energy support and defense. Upward pressure on yields adds to the strain. The agency still anticipates a return to fiscal consolidation after the elections, plus a reduction in "below-the-line" spending tied to the Superbonus tax credit in 2028 and 2029. A possible extension of the repayment plan proposed by the government could change that profile. S&P's rate assumptions remain consistent with debt stabilization by 2028, with 10-year yields forecast at 3.9% in 2026, 4.0% in 2027 and 3.6% across 2028-2029.

The agency is blunt about the limits. Primary surpluses recorded since 2024 are largely absorbed by high interest payments, and modest growth weighs on the debt-to-GDP ratio. Growth is, in S&P's view, the main long-term challenge to Italy's creditworthiness. Resilience to trade and energy shocks was helped by a more accommodative non-energy external sector than expected and by the Next Generation EU stimulus plan. As that plan winds down in 2026-2027, S&P says structural weaknesses, from unfavorable demographics to stagnant productivity, will re-emerge forcefully. It also sketches a negative scenario in which forecasts deteriorate because of trade or energy uncertainty.

Economy Minister Giancarlo Giorgetti welcomed the decision, calling the positive outlook "further confirmation that we are on the right path." In such difficult times, he said, a confirmation is a success.

The market backdrop has grown more complicated since S&P's last review on January 30, when it kept the rating but lifted the outlook from stable to positive, a step that generally precedes an upgrade. The conflict between the United States and Iran has pushed up energy prices and inflation, and sovereign yields with them. The 10-year BTp, under 3.30% at the end of February, now trades above 4.40%, with a spread of about 100 basis points against a January low below 60. France, still rated in the "A" category by all three major agencies, is going through a fiscal crisis that has widened its spreads.

Italy still has arguments on fundamentals. GDP growth this year is expected near 1% by national and international institutions, no small feat amid a trade war. The 2025 deficit narrowly failed to fall below 3%, missing an early exit from the EU excessive deficit procedure, but a return under the threshold is expected this year with a primary surplus of 1.2% of GDP. Moody's Baa2 remains Italy's lowest rating, a safe distance from speculative territory. Public debt, second-highest in Europe after Greece, sits broadly stable between 135% and 140% of GDP.

An upgrade to A- would mainly matter for demand. Foreign investors hold about 35% of outstanding government securities, versus 52% in 2010, though they have added more than €280 billion in under five years. Many funds are barred by mandate from buying below certain ratings and still exclude BTps; an upgrade would widen the buyer base, draw long-horizon funds, and reduce volatility and spreads. Full effect would require alignment from the other agencies, since A- from S&P would still be the lowest rating in that category. The concrete prize is cheaper debt: interest spending is back to 4% of GDP, and halving the spread would free resources for fiscal repair. Watch the 2027 election, the end of Next Generation EU money, and energy prices tied to the Iran conflict.