Italy economy minister says 2024 growth target may be out of reach

2:19 pm Tuesday, October 08th, 2024

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) – The Italian government’s 1% economic growth target for this year will be more difficult to reach after downward revisions made last week by national statistics bureau ISTAT, Economy Minister Giancarlo Giorgetti said on Tuesday.

ISTAT on Friday lowered the year-on-year GDP growth rates for the first and second quarters and said so-called “acquired growth” at the end of the second quarter stood at 0.4%, down from the 0.6% estimated prior to the revisions.

As a result, if there were to be zero quarterly growth in the third and fourth quarters, full-year growth would come in at 0.4% from the previous year.

The revisions “make it harder to reach 1% growth this year,” Giorgetti told parliament in an address to lawmakers on Italy’s multi-year budget plan.

The new data, “while having a likely impact on the final reading for 2024, do not raise concerns for the following years,” Giorgetti said.

He added that he expected ISTAT to revise up GDP data for 2023 and the first part of 2024 in the future, without giving further details.

The government’s budget plan is based on “extremely conservative” macroeconomic estimates, Giorgetti said, promising a prudent approach to public finances.

“Moreover, Italy’s adjustment path is fully compliant with the reform of European Union fiscal rules.”

Italy was put under a so-called Excessive Deficit Procedure by the EU this year after its 2023 budget deficit came in at 7.2% of GDP, the highest in the euro zone.

Rome sees this year’s deficit falling sharply to 3.8% of GDP. After declining to a projected 3.3% in 2025, the fiscal gap is targeted at 2.8% in 2026, below the EU’s 3% ceiling.

“The government believes it can achieve a reduction in the debt-to-GDP that would take Italy out of the excessive deficit procedure starting from 2027,” Giorgetti said.

Italy’s budget plan will also detail reforms in several policy areas, he said, including measures to make the tax system more efficient. These reforms are partly aimed at ensuring that Italy secures EU approval for a seven-year budget adjustment instead of over a four-year horizon.

Among the planned measures, Giorgetti said he wanted to raise state estimates of house values used for tax purposes. These estimates are often outdated, crimping tax revenues and ensuring unwarranted access to tax breaks.

The review will refer in particular to the evaluations of properties that have benefited from state-funded renovations such as the so-called Superbonus scheme, the minister said.

(Reporting by Giuseppe Fonte and Gavin Jones)