Standard & Poor’s cut Italy’s sovereign credit rating on Friday from BBB to BBB-, just one notch above junk, saying weak growth and poor competitiveness undermined the sustainability of its huge public debt.
The downgrade is a blow for Prime Minister Matteo Renzi, who came to office in February pledging an ambitious reform agenda to lift Italy out of recession, but has seen the economy continue to shrink.
S&P said the new BBB- rating carried a stable outlook. It forecast Italian economic growth would be just 0.2 percent in 2015 and would average 0.5 percent in 2014-2017.
As recently as June, the agency had confirmed Italy’s BBB rating and forecast average growth of 1.0 percent over the three-year period.
Italy’s economy is expected to shrink in 2014 for the third straight year.
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