MILAN Oct 25 Fitch revised up its forecast for
Italy's public debt on Friday, saying it would peak at 133
percent of gross domestic product next year, as it affirmed its
long-term rating on the euro zone's third-largest economy at
In March, Fitch predicted that 2014 debt would be 130
percent of GDP. It said on Friday the increase in the
debt-to-GDP ratio was primarily due to one-off-measures,
including the repayment of debt arrears owed by the state to
businesses in 2013-14. Debt was expected to remain above 120
percent of GDP until 2018, it said.
Fitch, which maintained a negative outlook on Italy's
rating, said Rome had progressed substantially with fiscal
consolidation and that an economic recession which started in
2011 was expected to end this year.
It confirmed its forecast of a GDP decline of 1.8 percent
for 2013, to be followed by growth of 0.6 percent in 2014, and 1
percent in 2015.
However, it warned that Italy's growth potential was weak
compared to both rating peers and other euro zone countries, and
said the fact debt was forecast to stay above 120 percent for
several years left "very limited fiscal space to respond to
Among risk factors that could lead to a downgrade, Fitch
cited a new bout of domestic political turmoil, a
longer-than-expected recession, and any economic and fiscal
developments which undercut confidence that debt will be "on a
firm downward path from 2014-15."
Fitch also singled out the risk of possible significant
public recapitalisation needs for Italy's financial sector, on
top of a 4.1-billion-euro state bailout for its third-biggest
bank, Monte dei Paschi di Siena.
Such needs may arise, for example, in the context of a
health-check-up of euro zone lenders to be carried out by the
European Central Bank over the next year, it said. Fifteen
Italian lenders will be subjected to the asset quality review.
(Reporting by Silvia Aloisi; editing by Ron Askew)