Italy’s sovereign debt rating was held at Baa3 by Moody’s on Friday, one place above junk, but upgraded the outlook to stable from negative.

This was a surprise boost for Giorgia Meloni’s government, as most analysts had forecast Moody’s would leave the country’s rating and outlook unchanged.

In August 2022, Moody’s had put Italy’s economy on a negative outlook following the collapse of the government and in the middle of an energy crisis, Reuters reports.

“The decision to change the outlook to stable from negative reflects a stabilisation of prospects for the country’s economic strength, the health of its banking sector and the government’s debt dynamics,” Moody’s said.

Moody’s was the fourth rating agency to review Italy over the past month. Previously, S&P Global, DBRS and Fitch all kept their ratings and outlooks the same.

Italy’s Economy Minister Giancarlo Giorgetti welcomed the announcement by Moody’s.

“It’s a confirmation that despite many difficulties, we are working well for the future of Italy,” he commented in a statement.

“So in the light of the judgment expressed by Moody’s and the other rating agencies, we hope that the prudent, responsible and serious budget policies of the government…will be confirmed by parliament,” the Economy Minister added.

As it stands, the government’s 2024 budget is going through the Italian parliament.

Furthermore, in Q3 this year, Italy’s economy stagnated compared to the previous three months, according to preliminary data published in October. Indeed, the country’s economy contracted by 0.4% in the second quarter. According to analysts, activity will remain weak in the coming quarters.

Last Wednesday, the European Commission forecast Italy’s debt, which is proportionally the second-highest in the eurozone, would marginally edge up from a forecast 140% of national output in 2023 to 141% in 2025.