MILAN, Oct 9 (Reuters) - S&P Global will probably stay on hold on Friday in its review of Italy's credit rating, currently 'BBB+' with a stable outlook, as weakening growth prospects offset progress in public finances, analysts said.
The euro zone's third-largest economy last week targeted its budget deficit to fall to 3% of output this year for the first time since before the COVID-19 pandemic, but the economic outlook is clouded by the negative impact of U.S. tariffs, which the government estimates will subtract 0.5% from gross domestic product in 2026.
"The better-than-expected deficit-to-GDP level for this year of 3% is offset by slightly worse growth prospects," Spanish bank BBVA said in a report this week.
"That's the reason why we do not expect a positive rating decision or change in the outlook," it added.
Nonetheless Italy, long-regarded as one of the weakest links in the euro area, has recently received a series of positive moves from rating agencies, in contrast to France, whose high budget deficit and deep political crisis have triggered downgrades to its rating.
Fitch raised Italy to BBB+ last month and S&P Global also hiked its rating as recently as April, another reason the agency is considered likely to pause for thought on Friday.
"They might prefer to be on hold this time and await more news by the next assessment in the spring," said Fabio Balboni, senior economist at HSBC.
He added that a shift to a positive outlook may then come if the hard data confirms expectations of deficit reduction, and growth proves to be relatively resilient.
Italy downgraded its growth forecasts last week to 0.5% this year and 0.7% in 2026
S&P Global's review will be followed by DBRS and Scope Ratings later this month, and finally Moody's in November.
Both DBRS and Moody's have Italy on a positive outlook, and Economy Minister Giancarlo Giorgetti said on Wednesday he was hopeful of further good news from the agencies.
"We have done our homework well and we should be recognised for it," he told parliament during testimony on the government's 2026 budget.
Reporting by Sara Rossi and Valentina Consiglio, editing by Gavin Jones
