Def: Bank of Italy confirms +0.6% GDP in 2024 but downside risks. In public accounts, watch out for the tax wedge
“A further temporary extension of the contribution relief would increase uncertainty about the future evolution of public finances“. This was underlined by Sergio Nicoletti Altimari, head of the Economics and Statistics department of Bank of Italy, during the hearing on the Def in the joint Budget Commissions of the Chamber and Senate. “Making the reliefs structural would open up two important questions. First of all – observes the Bank of Italy representative – the balance between contribution income and outgoings for benefits which, in the medium term, characterizes our social security system and represents its strong point would be lost at an aggregate level. Secondly, without a change to the structure of the relief, workers with incomes close to the thresholds below which the benefit accrues would continue to be penalized by high effective marginal rates, with potentially distorting effects on the supply of labour”.
“Growth would have remained modest in the first months of the current year and manufacturing production would have decreased in the first quarter, held back by sluggish demand. On the other hand, activity would have benefited from a recovery in services and a further expansion in construction.” Altimari underlined.
“According to our projections, released in early April, lgrowth would be 0.6 percent this year and would average just above 1 percent over the next two years“. “If we exclude the correction for working days, our macroeconomic picture projects growth of 0.8 percent this year, 0.9 percent next year and 1.3 percent in 2020. It – observed the representative of Bank of Italy – it therefore differs only slightly from that presented in the Def. The Government’s estimate for this year discounts a more favorable assessment of the internal components of demand, in particular consumption, both public and private, and a rebound in inventories. For the next two years, a higher investment trend is expected than what we had envisaged.” Overall, according to the Via Nazionale institute, “the macroeconomic trends outlined by the DEF at the basis of the public finance trend framework are included in the range of projections of the main forecasters, ranking among the most positive ones” but “the risks for growth remain mainly oriented downwards”.
“When introducing new incentive schemes, it will also be necessary to avoid repeating the errors that have characterized some recent measures, in particular the Superbonus experience. The repeated upward revisions of the cost estimates of past measures – explained the Bank of Italy representative – inevitably generate uncertainty. To help dissipate it, information is needed on some very relevant variables for the evolution of the accounts, in particular those relating to the building incentives that are expected to accrue in 2024-25 and the timing of the Pnrr investments”. According to the Via Nazionale institute, “budget policy will be called upon, in addition to finding resources for the ‘unchanged policies’ that we decide to pursue, also to finance the digital and green transitions. To achieve the objectives connected to these, in fact, it seems necessary to strengthen public investments in innovation, the system of incentives for research and development and energy efficiency”.
“Not only that, for the first time in our history (and in violation of an Italian law, that of national accounting), a government that does not resign chooses not to make the programmatic framework of the Def“. This was declared by Luigi Marattin, group leader of Italia Viva in the Budget Committee of the Chamber. “But even the trend picture, 13 days after the approval of the Def by the government, is denied by Istat. Which says that the 2023 deficit is not 7.2% as the government says but 7.4%. The government is in disarray. Here the problem is not fascism, but the total inability to govern”, he concludes.
“In view of the arrival in the chamber at Palazzo Madama of the Pnrr decree and the vote on the Def, the PD group in the Senate is organizing a press conference for tomorrow, Tuesday 23 April, to take stock of the government’s choices in light of the dramatic situation of the public accounts”. This is what we read in a note. “At the press conference, which will take place in the Caduti di Nassyria room of Palazzo Madama, at 12.30, the president of the PD senators Francesco Boccia and the dem senators of the Budget commission Daniele Manca, Beatrice Lorenzin, Antonio Misiani and Antonio Nicita will speak”.
“The contribution provided by a full and effective implementation of the Pnrr investments which should accelerate starting from this year is more decisive than ever for achieving the development rates outlined in the Government’s framework”. This was underlined by Sergio Nicoletti Altimari, head of the Economics and Statistics department of Bank of Italy, during the hearing on the Def in the joint Budget Commissions of the Chamber and Senate.
“Health spending in relation to product would remain essentially unchanged until 2027 (around 6.3 percent). Looking ahead, however, the pressures on health spending that may arise from the aging population will need to be carefully managed”. This was underlined by Sergio Nicoletti Altimari, head of the Economics and Statistics department of Bank of Italy, during the hearing on the Def in joint commissions Budget of the House and Senate.