Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

Italy slashes 2023 growth forecast but sees public finances improving

Economic Indicators Sep 28, 2022 02:47PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A woman shops at Campo de' Fiori market in Rome, Italy, June 15, 2022. REUTERS/Guglielmo Mangiapane/File Photo

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) - Mario Draghi's outgoing Italian government on Wednesday slashed next year's economic growth forecast to 0.6% due to sky-high energy costs but said strong revenues would still ensure an improvement in public finances.

Gross domestic product in the euro zone's third largest economy will "decline slightly" over the second half of this year, a government statement said.

The new growth projections underscore the economic headwinds facing Giorgia Meloni, who led a right-wing alliance to victory at elections on Sunday and is expected to be named prime minister next month.

The Treasury's annual Economic and Financial Document (DEF) said GDP would expand 3.3% in 2022, up from a 3.1% forecast set in April, thanks to buoyant growth over the first six months.

The 0.6% forecast for next year signals a dramatic worsening in the outlook compared with the previous goal of 2.4%.

Draghi has already earmarked some 66 billion euros ($64 billion) since January to try to soften the energy crisis exacerbated by Ukraine war. His successor will probably have to move along the same path.

Now serving in a caretaker capacity, Draghi penciled in the forecasts under an unchanged policy scenario.

Meloni may set new targets shortly after taking office if she believes her promised tax cuts and spending measures can stimulate the economy.

DEFICIT, DEBT TO FALL

Despite the weakening growth outlook, record-high inflation is helping to bring down Italy's huge public debt as a proportion of nominal GDP. At the same time, the surge in oil and gas prices is boosting revenues from value added tax and excise duties.

The DEF sees the budget deficit at 5.1% of GDP in 2022, sharply down from a previous target of 5.6%, while the forecast for 2023 is cut to 3.4% from 3.9%.

This gives Meloni room for expansionary measures worth around 0.5% of GDP this year and next without raising the deficit levels above the previous targets.

The forecasting document sees the fiscal gap declining very gradually to 3.2% in 2025, still above the European Union's 3% ceiling which has been temporarily suspended to help the bloc's economies recover from the impact of the COVID-19 pandemic.

Italy's public debt, proportionally the second highest in the euro zone after Greece's, is seen at 145.4% of GDP this year, down from a previous forecast of 147.0%.

It is targeted to decline to 143.2% in 2023.

Inflation, measured using the consumption deflator, is seen averaging 6.6% this year and 4.5% in 2023.

The DEF also said that Italy had so far managed to spend around 21 billion euros of European Union pandemic recovery funds.

That leaves a further 170 billion still to be invested through 2026, provided Rome can meet the policy "targets and milestones" agreed with Brussels as a condition for disbursing the money.

($1 = 1.0314 euros)

Italy slashes 2023 growth forecast but sees public finances improving
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email