February 26, 2020 / 8:09 AM / a month ago

Limited credit implications for Italy from virus: DBRS Morningstar

MILAN (Reuters) - An outbreak of the new coronavirus which has stoked recession fears in Italy is expected to have limited implications for the country’s credit rating, DBRS Morningstar said on Wednesday, adding the economic impact should be modest.

The number of cases of people infected in Italy rose to 322 from 229 on Monday, with the vast majority from Lombardy and Veneto, the economic powerhouse of the country that include the financial capital Milan and the tourist hotspot Venice.

The death toll from the worst outbreak in Europe rose to 11.

The measures put in place to stop contagion will dampen economic activity and hurt tourism, the agency said, adding however, its baseline scenario was one of a temporary demand shock that would affect one or two quarters.

“This is unlikely to have lasting implications for Italy’s economy or for its DBRS Morningstar credit rating (BBB (high) with a stable trend),” it said in a statement.

However, DBRS said government projections underpinning the 2020 budget were now at risk, with an expected growth of 0.6% this year looking “very ambitious” with it too early to estimate the full economic impact of the crisis.

DBRS Morningstar said it expected possible fiscal measures to sustain growth despite Italy’s limited room for maneuver and warned the government faced a tall order in containing the virus.

“A mismanagement of the situation might negatively affect government stability”, DBRS said.

Reporting by Valentina Za, editing by Gianluca Semeraro and Jason Neely

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