Bank of Italy Views Government’s 1% 2024 GDP Target as Difficult to Achieve – Reuters

By Giuseppe Fonte

ROME – The Italian government’s goal of achieving 1% economic growth this year has become more challenging following recent downward revisions from the national statistics bureau, ISTAT, according to the Bank of Italy.

Sergio Nicoletti Altimari, the head of economics at the central bank, testified in parliament that these revisions translate to a 0.2 percentage point reduction in the government’s growth estimate for the current year. Consequently, the projected growth for 2024 in Italy, the euro zone’s third-largest economy, is now anticipated to be 0.8%, rather than the previously set 1%.

ISTAT recently adjusted its year-on-year GDP growth rates for the first and second quarters, indicating that the "acquired growth" by the end of the second quarter was only 0.4%—a decrease from the earlier estimate of 0.6%. If the economy experiences zero growth in both the third and fourth quarters, the total growth for the year would stand at just 0.4% compared to the previous year.

The Treasury’s multi-year budget plan, released in September, foresaw a growth rate of 1% for 2024, followed by 1.2% in 2025 and 1.1% in 2026. Nicoletti Altimari acknowledged that while the overall economic framework of the plan aligns with projections from leading forecasters, it appears more optimistic than the central bank’s recent assessments, which suggest possible downside risks.

The central bank emphasized the importance of a cautious approach to public finances, advocating for a steadily declining debt-to-GDP ratio as a key priority. The Treasury aims to reduce this year’s budget deficit to 3.8% of GDP, a significant drop from last year’s 7.2%, which was the highest in the euro zone.

The plan is to further decrease the deficit to 3.3% of GDP for next year, targeting 2.8% in 2026—well below the EU’s 3% threshold. Current estimates suggest the deficit could reach 2.9% of GDP in 2025 and 2.1% in 2026, which would provide some flexibility for potential spending increases or tax reductions.

However, the Bank of Italy cautioned that even minor deviations from the government’s fiscal plan could complicate efforts to reduce the deficit beneath the EU’s 3% limit by 2026, as pledged.