MILAN, Nov 21, 2025 – Global credit ratings agency Moody’s upgraded Italy’s sovereign rating from Baa3 to Baa2, marking the country’s first rating increase in 23 years. The decision reflects Italy’s consistent political stability, fiscal discipline, and progress in economic reforms, according to Moody’s.

Moody’s Cites Policy Stability and Fiscal Progress

In its statement, Moody’s highlighted Italy’s strong performance under the National Recovery and Resilience Plan (NRRP), noting that the country leads the European Union in both payment requests and fund disbursements. The agency emphasized that these achievements demonstrate Italy’s commitment to its fiscal and economic milestones.

“This upgrade is a confirmation of Italy’s regained credibility and confidence in its government,” said Economy Minister Giancarlo Giorgetti. “It signals progress in implementing policies that strengthen Italy’s fiscal outlook and political stability.”

First Upgrade Since 2002

Italy’s last rating change was a downgrade in October 2018, and prior to that, the last upgrade occurred in May 2002, when Moody’s raised the rating from Aa3 to Aa2. The current upgrade represents a significant milestone, demonstrating international confidence in Italy’s economic and political management.

Fiscal Performance and Deficit Reduction

Italy is projected to reduce its fiscal deficit to below 3% of GDP in 2025, ahead of the previously pledged target of 3.3%. Achieving a deficit below 3% would allow Italy to exit the European Union’s excessive deficit procedure by mid-2026, alleviating external pressure on public finances.

Moody’s also noted that Italy’s high government debt is expected to gradually decline from 2027 onwards, supported by ongoing fiscal discipline and continued economic reform. While structural challenges such as an aging population and historically high debt levels remain, Moody’s highlighted that Italy’s credit strengths currently outweigh these risks.

Outlook and Implications

Moody’s revised Italy’s rating outlook from positive to stable, reflecting a balance between ongoing fiscal achievements and persistent economic challenges. The stable outlook signals confidence in Italy’s ability to maintain prudent fiscal policies while navigating demographic and debt-related pressures.

The rating upgrade is expected to enhance investor confidence, lower borrowing costs, and support Italy’s broader economic recovery efforts in the post-pandemic European landscape. Market observers note that Moody’s decision may encourage further reforms and bolster Italy’s position within the EU’s fiscal framework.

Looking Ahead

As Italy continues to implement its National Recovery and Resilience Plan and reduce its fiscal deficit, Moody’s upgrade demonstrates that sustained fiscal discipline, policy consistency, and political stability can positively influence sovereign credit ratings. Analysts expect that these developments will strengthen Italy’s long-term debt sustainability and support its economic growth trajectory.