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Bloomberg
The Italian Treasury is set to slash its growth forecast for this year and raise its projected budget deficit, according to two senior officials with knowledge of the draft outlook.
The economy will expand by just 0.1 percent this year, according to the draft, which is due for cabinet approval by April 10, the officials said. The government’s previous forecast was for a 1 percent expansion and the new prediction is in line with Bloomberg’s latest survey of economists.
Such dire figures highlight the uphill struggle the government faces to fix the economy. The country, which fell into a recession late last year, is burdened with a debt ratio of more than 130 percent of GDP and stagnation will make it even harder to take control of the
fiscal situation.
The budget shortfall is projected to be 2.3 percent or 2.4 percent of GDP, compared with the previous forecast of 2.04 percent agreed on with the European Commission last year. The government is aiming to achieve growth of 0.3 percent or 0.4 percent with a series of measures to boost output included in the so-called Growth Decree, which goes to a separate cabinet meeting.
The forecasts could still be revised before they are approved by the cabinet next week, the officials said, asking not to be named discussing confidential analysis.
A wider deficit could revive some tensions with the European Commission after blunt exchanges in 2018. The government isn’t keen on measures that would dampen growth, and Finance Minister Giovanni Tria has said that restrictive fiscal measures would be “absurd.â€
Italy’s fractious populist coalition has in the past week been the subject of admonitions about its prospects from both Commission President Jean-Claude Juncker and the Organisation for Economic Cooperation and Development.
Juncker said on a visit to Rome he wants “extra efforts to maintain growth†after meet-ing Prime Minister Giuseppe Conte. The previous day, the OECD said there’s increas-
ing urgency for measures to
reduce public debt.