WASHINGTON: Rating firm Moody's on Friday affirmed Sweden's coveted triple-A rating, citing the country's sound fiscal policies and continued progress in cutting its debt burden.
"The main driver underlying Moody's decision to affirm the Swedish government's Aaa rating and stable outlook is Moody's expectation of continued healthy public finances relative to Aaa-rated global peers," the company said.
Moody's Investors Service said also that it kept Sweden's gold-plated rating because of expectations the government "will continue its conservative management of its fiscal position, based on the government's medium-term expenditure ceilings and surplus targets."
Those policies have resulted in a general downward trend in the public debt-to-gross domestic product ratio over the past decade, it said.
"Even among Aaa-rated peers, the country's public finance indicators compare very favorably," the international rating agency said.
Sweden's general government debt fell from 73.3 percent of GDP in 1996 to 38.4 percent of GDP in 2011, compared with a median debt-to-GDP ratio of 46.8 percent for Aaa-rated sovereign debt in the same year.
Even though the weaker economic outlook in 2012-2013 will limit tax receipts and result in an average budget deficit of 0.1 percent of GDP over the two-year period, Moody's said, it still expects the country's debt to further decline to about 35 percent of GDP in the next three years.
Moody's projected Sweden's economic would grow 1.1 percent in 2012 and 1.9 percent in 2013.
"This is a favorable performance compared with the poor short-term economic outlook for many of Sweden's Aaa-rated peers," it said.
Meanwhile, Fitch Ratings affirmed Italy's "A-" credit rating on Friday, pointing to progress on cutting its public spending deficit, but kept the outlook negative citing the risk of possible political and policy instability following upcoming elections.
"The current rating is based on the assumption that a stable new government will be formed shortly after the forthcoming elections and the government's policies will be consistent with recent structural reforms, and further measures to enhance the economy's competitiveness and growth potential will be adopted," said Fitch in a statement.
Fitch's affirmation of Italy's rating comes after a tops-turvy week in the country's politics.
Caretaker Prime Minister Mario Monti announced he would step down, triggering early elections in February, after loosing the support of the party of disgraced former Prime Minister Silvio Berlusconi, who said he would stand for a fourth term.
Monti, who has headed for the past year a technocratic government credited with pulling the economy back from the brink of needing a bailout, has declined to say whether he would stand in the elections.
In affirming the "A-" rating, Fitch cited Italy's progress in balancing public spending, saying the country is line to generate a surplus of 3 percent this year before debt payments.
Fitch said "an underlying budgetary position close to that necessary to stabilise the government debt to GDP ratio and a sustainable pension system ... underpins confidence in the long-run solvency of the Italian state."
Despite the recession triggered by pushing through sharp fiscal consolidation measures this year, Fitch said it believes Italy will avoid a self-reinforcing debt trap.
The ratings agency said the pledge by the European Central Bank to stand ready to buy unlimited amounts of debt of eurozone countries that implement reforms under bailout programs eased stress in the bond markets, including for Italy.
Fitch said that its baseline scenario saw the Italian economy beginning to recover in the second half of next year, mostly due to improving external demand.
However it cited possible government instability following the forthcoming elections and prolonged uncertainty over economic and fiscal policies and policy continuity as a factor that could lead to a downgrade.
The failure to get the public debt, which data released on Friday showed has broken the symbolic two trillion euro threshold, on a sustainable downward path could also prompt a downgrade, as could a general aggravation of the euro zone debt crisis, added Fitch.
