(Bloomberg) -- Italy’s credit status remains intact at S&P Global Ratings, which enacted the first major scrutiny on a worsened trajectory for debt foreseen by Premier Giorgia Meloni’s government.

In a statement on Friday, the company listed the euro zone’s third-biggest economy as one of the sovereigns that it had just reviewed without issuing any analysis. 

The country is still assessed at BBB, or two notches above junk, with a stable outlook that signals it isn’t in imminent danger of a downgrade. 

This was the first in this year’s assessments by major ratings companies on Italy’s credit status, and the judgment took on some significance after the government’s implicit acknowledgment this month that its debt-cutting efforts have not only stalled, but look likely to go into reverse.

The S&P decision keeps Italy out of the spotlight after a period of calm for the country in financial markets. Earlier this year, the extra yield paid for Italian debt over German equivalents fell to a two-year low. 

That partly reflected the restraint for the public finances that Meloni’s coalition has preached since coming to power in late 2022, all while treading a fine line that still allowed for some fiscal loosening. 

The strategy has paid off until now, with Moody’s even removing its threat of a cut to junk.

Italy’s fiscal position has been eroded however by the impact of rising interest rates and economic weakness in neighbors such as Germany.

Just this week, the International Monetary Fund made its own prediction that a period of post-pandemic debt reduction has ended for the country, with its borrowings now set to rise over the next half decade. 

The government’s recently published forecasts acknowledged a change in direction too. They indicate Italy’s debt pile will peak at 139.8% of output in 2026, while the IMF reckons that it will breach 140% as soon as next year. 

Those projections by the treasury were based on a far rosier outlook for economic growth this year, anticipating 1% expansion, compared with 0.6% seen by both the Bank of Italy and many private-sector forecasters. 

The government numbers didn’t reflect potential legislation, because Italy is transitioning to a new system of fiscal oversight by European Union authorities. More detailed figures won’t be published until September, after the upcoming EU elections.

That timetable may tempt Meloni to delay tough decisions such as whether to cancel promised tax cuts or aid to companies and citizens until the vote is over. At that point, EU pressure to enact such measures is likely to increase so as to comply with newly reinstated stability pact rules.

S&P’s rivals Fitch Ratings and Moody’s are scheduled to issue potential assessments on Italy on May 3 and May 31 respectively.

©2024 Bloomberg L.P.