ROME, Italy: In an unexpected boost for Prime Minister Giorgia Meloni's government, on Friday, Moody's upgraded Italy's economic outlook from negative to stable and left its sovereign debt rating at Baa3, one level above junk.

The agency was expected to leave both Italy's rating and outlook unchanged.

After a government collapse amid an energy crisis, Moody's placed the eurozone's third-largest economy on a negative outlook in August 2022.

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

S&P Global, DBRS and Fitch all left their ratings and outlooks unchanged.

Welcoming the announcement, economy Minister Giancarlo Giorgetti said, "It is a confirmation that despite many difficulties, we are working well for the future of Italy."

"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," he added.

Preliminary data released last month showed that the Italian economy stagnated in the third quarter compared with the previous three months, after contracting by 0.4 percent between April and June.

On Wednesday, the European Commission forecasted Italy's debt, proportionally the second-highest in the eurozone, to rise marginally from a projected 140 percent of national output this year to 141 percent in 2025.

The Italian government's budget for 2024 is currently being reviewed by the Italian parliament.