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He must reduce the deficit without tightening the belt

He must reduce the deficit without tightening the belt

The current official deficit target for the Italian budget for this year is 4.5 percent of GDP, but this percentage is expected to increase. The deficit could reach 5%, mainly due to weak economic growth, fulfillment of electoral promises, and housing renovation incentives.

Italy has a huge budget deficit for this year, and the deteriorating data shows a bleak outlook for 2024 as well.
Picture: Gents Ifoskans/AFP

Lower-than-expected growth and welfare measures could lead to next year’s budget deficit. It was reported that projections for this could be increased from 3.7 percent to 4 percent bloomberg A government insider.

Marco Protopaba, an analyst at JPMorgan, expects a bigger deficit from the government in his report on Tuesday, he said.

This year, the budget deficit could reach 6.5 percent of GDP.

Georgia Meloni’s right-wing three-party coalition must link its campaign promises to the sustainability of Italy’s debt.

Although Italy is not currently subject to the EU’s fiscal constraints, because the Stability and Growth Pact is still suspended, it will enter into force again next year. The agreement limits the national budget deficit to 3 percent of GDP, which poses a challenge to Italians. The government must ensure that the European Commission does not launch excessive deficit measures against the country, which it narrowly avoided in 2019.

So maintaining budgetary discipline next year will be more important than this year

The expert explained. And it will be a really delicate task, because in the midst of highly volatile domestic politics, this will have to happen without tightening the belts.

balance the Italian budget

Rising interest rates, global demand and weakness of the main partner, Germany, are negatively affecting the country’s economy.

Weak economic growth isn’t helping either. While the economy grew by 0.6 percent in the first quarter of this year, it contracted by 0.4 percent in the second quarter. Economists expect a very small growth of 0.1% in the third and fourth quarters as well.

The larger budget deficit encourages the state to privatize part of the corporate holdings, which the government is already considering. The sale of Telecom Italia is also on the cards. The administration has also started liquidating the monthly allowance due to the nationality, which is the basic income.

Despite the gloomy outlook, Finance Minister Giancarlo Giorgetti expects economic growth to reach 1 percent next year.

The Italian government coalition is torn apart by a dispute over the fate of the country’s assets

Money is needed to cover the promised expenses, and they do not want to increase the already very high public debt.

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