CashNews.co
By Giuseppe Fonte
ROME (Reuters) – Italy is targeting 1% economic growth this year and 1.2% in 2025 and has revised down its deficit goals as a proportion of gross domestic product (GDP) for both this year and next, sources said ahead of the publication of the figures on Friday.
Italy’s huge public debt, already the second largest in the euro zone as a ratio of GDP and under close scrutiny by markets, is expected to rise through 2026 from 134.6% of GDP in 2023 due to costly home renovation incentives, said the sources, who are familiar with the forecasts.
Both growth targets are in line with previous estimates made in April, despite an expected slowdown in global trade which could darken the economic outlook over the next few months.
Most of Italy’s economic growth is due to investments funded by European Union post-Covid recovery funds.
According to the sources, Rome will set this year’s budget deficit target at 3.8% of national output, below a previous 4.3% estimate.
The deficit is likely to be targeted at 3.2% of GDP in 2025, more ambitious than a previous 3.6% goal agreed with European Union authorities.
The figures factor in revisions to economic growth data for 1995-2023 unveiled this week by the national statistics bureau ISTAT, which gave a modest boost to Prime Minister Giorgia Meloni’s government.
Italy was put under a so-called Excessive Deficit Procedure by the EU this year, as its 2023 fiscal deficit came in at 7.2% of GDP.
In its budget plan to be published on Friday and then sent to Brussels in October, after parliamentary approval, Italy will commit to bring the deficit below the EU’s 3% ceiling in 2026, when the fiscal gap is targeted at 2.7%.
“Italy aims to follow a prudent and responsible budget policy,” Economy Minister Giancarlo Giorgetti told trade unions in a meeting on Wednesday.
The infringement procedure obliges Italy to cut its structural budget deficit – net of one-off factors and business cycle fluctuations – by 0.5% or 0.6% of GDP per year.
Italy also needs to comply with the latest reform of the bloc’s fiscal rules, which requires a slow but steady pace of headline deficit and debt reduction from 2025 over four to seven years, depending on commitments regarding reforms and strategic investments.
The budget plan will detail reforms related to four main policy areas, including justice and the fight against tax evasion with the aim of securing EU approval for a seven-year budget adjustment.
(Editing by Giulia Segreti and Ros Russell)