News ID: 259897
Published: 0801 GMT October 08, 2019

Italy’s economic risks grow as Gualtieri seeks stimulus money

Italy’s economic risks grow as Gualtieri seeks stimulus money
FORBES

Italy’s economic outlook is growing dimmer, adding pressure on the government to deliver on its tricky promise of an expansionary budget while setting aside billions to avoid a planned increase in sales-tax.

Finance Minister Roberto Gualtieri is scrambling to put together the funding to contain the deficit, avoid economic stagnation and spur growth despite the millstone of Italy’s debt that leaves little room for extra spending, Bloomberg wrote.

Gualtieri is due present a draft to the European Commission by Oct. 15, before getting a final approval by year end.

“My aim is to relaunch Italy’s growth and employment,” he told the country’s business lobby, Confindustria. “The government’s 0.6 percent growth forecast for next year is balanced, and even prudent.”

The Italian economy is officially forecast to barely grow this year, though the new government led by Prime Minister Giuseppe Conte aims to boost that to 0.6 percent with investment, lower labor taxes, countering tax evasion and cutting unemployment.

The target already looked hard to achieve, and Gualtieri got a reminder of the risks facing the euro area’s third-largest economy.

Italy’s statistics office Istat warned that the outlook is negative and that “short-term perspectives for Italian production are weak.” Figures due Thursday are forecast to show industrial output rose 0.1 percent in August, though that would follow declines of 0.7 percent an 0.3 percent the previous two months.

Confindustria’s predicts the economy will stagnate both this year and next unless a planned sales-tax increase of 23 billion euros ($25 billion) is averted — something Gualtieri has promised to do.

Avoiding the automatic increase due to kick in next year will be “crucial” for Italy’s economic outlook, the group said. It forecasts 0.4 percent expansion in 2020 if that happens.

But one month into the job, Gualtieri has to finely balance deficit reduction with Italy’s need for investment, as well as appeasing the European Commission.

The government’s draft outlook set a 2020 deficit target at 2.2 percent of gross domestic product, meaning that the structural deficit will worsen by 0.1 percentage point next year, instead of the 0.6 percentage point improvement that Italy had committed to.

“We are confident that the flexibility we are looking for is within the rules. We have a constant dialogue with Brussels,” Gualtieri said. “We expect a positive reaction to our budget.”

 

   
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