In the introduction of the Nadef (update note to the Def) approved by the Council of Ministers last September 29, the Minister of Economy and Finance, Daniele Franco, stressed that the scenario of the Italian economy is one of progressive growth and a gradual reduction of the public deficit and debt. The stance of fiscal policy will, in fact, remain expansive over the next two years, and then gradually become more focused on reducing the debt / GDP ratio.
The new macroeconomic forecasts of the government for 2022-2024, while acknowledging some risks linked to the evolution of the pandemic, to world demand and to the sharp increases in energy prices recorded in recent months, take note of the improvement of the main growth indicators and debt compared to the estimates contained in the Def and define the public finance perimeter of the next Budget Law.
According to forecasts: the higher level of GDP (expected at + 6% for the current year) and the lower net debt (expected at 9.4% of GDP) should allow a decline in the ratio of public debt to GDP (from 155.6% in 2020 to 153.5% in 2021), which was instead estimated to increase in the April Def.
With debt consolidation so dependent on a virtuous growth / interest rate dynamic, however, the definition of such an economic prospectus could generate several critical issues: how long can growth exceed the cost of the loan? How fragile is the debt profile to changes in these assumptions?
According to Barclays economists, the quality of Italian finances has significantly improved and will remain supported by the European Central Bank’s ultra-accommodative stance. “In 2022, based on our expectations, for the approximately 700 billion euros of Qe purchases, we expect the ECB to more than easily neutralize Italy’s net issuance, which should support the continuing decline in interest expenses,” while the economic cycle should remain favorable and supported by the structural expenditure linked to the NextGenerationEU “, explain the experts.
According to the investment bank, medium-term projections of debt dynamics suggest that Italian debt is sustainable with lower growth assumptions, but vulnerable to shocks. Overall, the expected scenarios nevertheless remain optimistic: “we think the political environment will remain positive, the economy is undergoing a mix of investments and growth-promoting reforms, and secured credit shows no scars so far marked by Covid-19. “continue the analysts.
Furthermore, the risk of a public debt crisis remains very low. “We are aware that the market reaction to a particular shock can be non-linear and that Italian sovereign debt may, in this sense, no longer be supported by the market, but at present we do not see any catalyst for a similar result and we think that the background put in place by the European institutions, for example, Pepp and Mes credit lines, could be used in the event of any speculative attack, provided that in the future the Italian government remains enrolled in the European project “, explains Barclays.
For 2022, programmatic GDP growth is expected to be 4.7%, 2.8% in 2023 and 1.9% in 2024. The decline in the debt / GDP ratio will continue to reach 146.1% in 2024. The new growth projections of the Italian government are, for Barclays analysts, considerably more optimistic than previously expected, but remain realistic and broadly in line with their estimate for 2021 and 2022. For 2023, instead , the Italian forecasts remain above those that economists and the Bloomberg consensus expect: 2% on an annual basis. (All rights reserved)