Italy is about to increase its growth forecast for 2023 but cut subsequent yr’s projection because the medium time period outlook darkens, authorities officers mentioned, whereas confirming earlier public finance targets to hold the finances deficit on a downwards pattern.
In its Financial and Monetary Doc (DEF) to be unveiled on Tuesday, the Treasury forecasts gross home product (GDP) to develop by 1% this yr, up from a 0.6% projection final November, two officers conversant in the matter mentioned.
The growth price can be 0.9% beneath an unchanged coverage state of affairs. The ultimate target is barely larger as Rome goals to unveil within the DEF a brand new set of measures which can be anticipated to help financial actions within the coming months.
Nevertheless, the destructive impression of rising rates of interest set by the European Central Financial institution to curb inflation is deteriorating the prospects for 2024.
The federal government now sees GDP rising by 1.4% subsequent yr, down from the earlier target of 1.9%.
Economic system Minister Giancarlo Giorgetti has mentioned larger rates of interest might pose a risk to growth, in an implicit criticism of European Central Financial institution (ECB) coverage.
One other key concern affecting the estimates is Italy’s capacity to meet up with the European Union’s post-COVID restoration funding programme.
Italy is due to obtain roughly 200 billion euros ($217.92 billion) in grants and low-cost loans by 2026, but the federal government is falling behind each on targets and milestones agreed with Brussels in return for the help, and on spending cash already obtained.
On the general public finance entrance, Rome intends to confirm its 2023 finances deficit target at 4.5% of nationwide output, the officers mentioned, helped by the actual fact the deficit is on target for a barely decrease 4.35% beneath present developments.
That enables potential leeway price up to Three billion euros of further spending or tax cuts.
Final yr, Italy reported a finances hole of 8% of GDP, but Rome is steadily phasing out the strongly expansionary coverage adopted since 2020 to soften the impression of the pandemic and an vitality disaster exacerbated by Russian invasion of Ukraine.
The federal government is predicted to hold its 3.7% deficit aim for 2024, one of many officers mentioned.
Italy’s public debt, proportionally the best within the euro zone after Greece, is focused to steadily decline over time to 140.9% of GDP in 2025 from 144.4% in 2022.
($1 = 0.9178 euros) (Enhancing by Chris Reese and Jamie Freed)