Italy’s government expects debt this year to “surely” stay below 140% of gross domestic product.
Speaking to reporters on the sidelines of the Ambrosetti Workshop in Cernobbio, Italy, Finance Ministry Undersecretary Federico Freni said the country’s expected growth will be “around 1%” in 2024. On Friday the Bank of Italy said the country’s economy will grow just 0.6% this year, maintaining a forecast that clashes with the government’s much rosier prediction.
“We don’t have the precise number yet but we are definitely above 210 billion euros … that’s how much we’ve spent for building incentive schemes,” he said.
“So we need to carefully plan and monitor public spending because we can’t sweep the debt under a rug,” he added.
Given the higher-than-forecast cost of the incentives, Italy may need to revise up its 2023 deficit and debt figures which currently stand at 7.2% and 137.3% of GDP, respectively.
Asked about whether the debt-to-GDP ratio could climb above 140% this year, Freni said: “Certainly not.”
Italy’s cabinet meets on April 9 to approve the Economic and Financial Document (DEF) with its latest forecasts.
Sources said earlier this week that the Treasury will estimate GDP growth of 1% in 2024, trimming a previous 1.2% figure set in September. That compares with a 0.8% expansion forecast by the Bank of Italy on Friday.
The latest growth forecast is also above the current 0.7% projection by the European Union, which Economic Commissioner Paolo Gentiloni on Friday said would be likely confirmed in June when the Commission publishes updated projections.
The Debt Situation
Italy’s debt-to-GDP ratio has been a cause for concern, reaching around 140% in recent years. This high level of indebtedness poses risks to the country’s financial stability and economic growth. But what does the future hold?
Government’s Optimistic Outlook
Finance Ministry Undersecretary Federico Freni recently addressed the issue during the Ambrosetti Workshop in Cernobbio, Italy. He stated that Italy’s government expects the debt-to-GDP ratio to “surely” stay below 140% this year. This assertion comes despite higher-than-forecast spending on home renovation incentives.
Expected Growth
Freni also shared insights into Italy’s economic growth prospects. The country anticipates modest growth of approximately 1% in 2024. While this figure may seem conservative, it reflects the government’s cautious approach, considering the challenges posed by the debt burden and other economic factors.
Differing Forecasts
Interestingly, the Bank of Italy has maintained a more conservative growth forecast, projecting only 0.6% growth for the same period. This discrepancy highlights the varying perspectives within the economic community. The government’s optimism hinges on consumer spending and stimulus from the European Union’s Recovery Fund, which aims to boost Italy’s economic recovery
Long-Term Challenges
Despite the positive outlook for 2024, Italy faces long-term challenges. It will likely take until at least 2026 to bring the budget deficit below the European Union’s 3% limit. Achieving fiscal discipline remains a priority, even as the country seeks avenues for growth.
Privatization Plans
Freni also touched upon privatization efforts. Italy plans to privatize some listed companies in which it holds stakes. Notably, the privatization won’t be rushed; it forms part of a three-year plan that includes entities like Monte dei Paschi di Siena SpA and Poste Italiane SpA. The government aims to strike a balance between privatization and maintaining public control.
