Italy lowers growth forecast in contested economic plan

Milan: Italian Prime Minister Giorgia Meloni’s government published updated economic forecasts Tuesday, but drew criticism for failing to include the impact of any electoral promises on next year’s budget.

Rome expects gross domestic product (GDP) in the eurozone’s third-largest economy to increase this year by 1.0 percent, compared its previous 1.2 percent forecast.

For 2025, it predicted growth of 1.2 percent, down from 1.4 percent.

The government also set a target of reducing Italy’s public deficit to 4.3 percent of GDP in 2024 and 3.7 percent in 2025, down from 7.2 percent in 2023.

The figures appeared in a roadmap adopted by Meloni’s cabinet, which lacked detail.

Normally, it is only outgoing governments that present roadmaps without budgetary projections, as Mario Draghi did in 2022 or Paolo Gentiloni in 2018.

Meloni’s government says it is waiting to understand more clearly the impact of reformed fiscal rules in the EU’s single Currency area, which should come into effect in May.

These provide for a new tool, a medium-term fiscal and structural plan, which will be submitted to Brussels before September 20, government sources said.

But the centre-left opposition accused Meloni’s hard-right coalition of seeking to avoid scrutiny of public finances ahead of European Parliament elections in June.

“The government wants to hide the truth from Italians … namely that the next budget will include cuts, blood and tears,” said Angelo Bonelli, MP for the Green and Left Alliance.

“The bill for the Italians will arrive later, and will be steep,” added Alessia Morani, a deputy for the Democratic Party.

Meloni’s government hopes to bring the public deficit down to 3.0 percent in 2026 — the ceiling required under the eurozone’s stability pact.

Last year’s deficit of 7.2 percent of GDP far exceeded the government’s forecast of 5.3 percent.

Ministers blamed this on the ballooning costs of a so-called Superbonus, an incentive scheme for energy-saving home improvements brought in under a previous administration.

Launched in May 2020 under Prime Minister Giuseppe Conte, it was credited with stimulating the Italian economy — but the costs have spiralled.

Economy Minister Giancarlo Giorgetti said Tuesday that when combined with other bonuses aimed at supporting the construction sector, it has cost the state 219 billion Euros — some 10 percent of GDP.

He said the now-discontinued Superbonus had been “devastating” for public finances.

The government forecast that Italy’s public debt — the second highest in the eurozone in relation to GDP, after Greece — will rise slightly, to 137.8% of GDP in 2024 and 138.9% in 2025, from 137.3% in 2023.

“The trajectory of the debt will be worrying during the coming years because of the Superbonus, as the beneficiaries of the scheme are going to claim their tax credits,” Nicola Nobile from Oxford Economics told AFP.

He said the deficit targets were “realistic” “but if the government wants to keep its election promises, such as income tax reductions for low-income earners, it will have to revise them upwards”.