Italy’s economy «has recovered well from the sequential shocks of the pandemic and oil pricespower thanks to the recovery of tourism and substantial political support. However, growth has moderated. If on the one hand it contributed to the recovery, on the other the fiscal policy expansionary policy has kept the deficit and public debt very high, raising Italy’s risk premium and acting as a brake on private sector investments.” It’s the one who says it International Monetary Fundin a light and shadow report drawn up on Italy at the end of a mission conducted in our country between 6 and 20 May, underlining the need to withdraw “inefficient and temporary crisis measures” to help the budget.
The Italian GDP should grow «by 0.7% in 2024 and 2025, as the acceleration of spending linked to Pnrr, which will be completed by mid-2026, largely offsets the gradual reduction in residential investments supported by Super bonus».
A temporary slowdown in growth could then occur between 2026 and 2027, with the conclusion of the Pnrr. A slowdown that could be “more gradual if the permitted spending period were extended”. Subsequently, the analysis is that «growth should return to potential, which would increasingly reflect the contraction of national population of working age, unless compensated by an increase in productivity supported by effective structural reforms and investments, increased workforce participation and the continued absorption of foreign workers.”
THEn Italy it is necessary to reinvigorate productivity
Among the most urgent objectives for the country is that of “revitalizing productivity”, which should pass through the “full and timely execution of the National Recovery and Resilience Plan, followed by a subsequent medium-term structural budget plan which will focus on critical public infrastructure, on research and theinnovationon reforming the education system and improving the business climate” in support of this objective.
«It will be necessary further fiscal effort to address growth-enhancing investment and latent spending pressures and to help restore fiscal space in the event of a shock serious”, underlines the IMF, indicating that “substantial savings are possible and desirable to finance measures that favor growth and efficiency”, including the replacement of cuts to tax wedge and hiring subsidies “with measures that permanently increase labor productivity”; «further rationalizing the pension expense, raising the effective retirement age and avoiding costly early retirement schemes”, “rationalizing tax expenditure to broaden the base, increase progressivity and reduce complexity” and “improving control and oversight of tax credits”. Finally the «banking system remains solid, but high interest rates and dwindling cash reserves could weaken borrowers’ debt-servicing ability.” (All rights reserved)
Posting time: 05/20/2024 5.56pm
Last update: 05/20/2024 8.56pm
