(Finance) – The upward revision of the Italian fiscal deficits of 2020 and 2021 is “substantially neutral” for sovereign creditworthiness as it was caused by the redistribution of existing tax credits, which does not alter the trajectory of public debt. This was stated in a note by Fitch Ratings, which has a “BBB” rating with a stable outlook on Italy.
The rating agency recalls that on 1 March 2023 Istat updated the deficits for 2020 and 2021 (revised respectively to 9.7% and 9% of GDPwith an increase of 0.2 and 1.8 percentage points), after the transposition of a Eurostat provision on the accounting treatment of certain tax credits such as the “Superbonus 110%” and the “Bonus facades”.
L’fiscal impact of redistribution from 2023” is less clearbut the prospects of lower headline deficits could influence policy decisions, while the end of tax credits will weigh on residential property investment,” says Fitch, according to which more details will be available in Italy’s Stability Program to be presented in April .
Plus, according to Fitch, reviews can too influence policymaking. “The reclassification does not create additional fiscal space, but if it allows for lowering of current account deficit targets, this could lead the government to ease fiscal settings to support the delivery of electoral commitments or to meet the policy demands of its coalition partners,” reads the note.