MILANO – The projections contained in the Nadef developed by the Italian government “represent a significant easing of fiscal policy compared to previous objectives”. The rating is expressed by the Fitch rating agency.
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“Our updated forecasts on public deficitequal to 5.2% of GDP in 2023 and 4.2% in 2024, are now close to the government’s new objectives, after the upward revisions of 0.8 and 0.7 percentage points carried out after the rating review ruler of May. Fitch expects a smaller decline in public debt/GDP compared to the revision, even if the debt/GDP ratio is lower due to the statistical revisions which increased the GDP in 2021-2022″.
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In particular, the rating agency now estimates that the ratio of public debt to GDP will fall by 1.3 percentage points to 140.3% this year, less than the 2.2 percentage points forecast in May, due to the revision of the deficit. Fitch also expects debt to stabilize at 140% of GDP at the end of 2025, “as the return to a primary surplus is offset by stock-flow adjustments and rising debt service costs.”
The judgment of the rating agencies and the IMF warning
In a certain sense, Fitch’s news “inaugurates” the window during which Italian accounts will end up under the scrutiny of the agencies. In fact, the calendar foresees the opinion of S&P (BBB with stable outlook) on 20 October, then on 27 October it will be the turn of Dbrs (BBB with stable outlook). It is therefore Fitch’s turn on November 10th (BBB with a stable outlook) and therefore the most tense rating is expected on November 17th: that of Moody’s, which keeps Italy only one step above the “junk” level (BAA3 with a negative outlook) .
The deficit maneuver that the government is preparing to launch, after having approved the Nadef, is of particular concern due to the easing of the deficit and debt. It is no coincidence that yet another reminder comes from the IMF on budget discipline: the Italian debt/GDP is falling too slowly and the Government must therefore set itself more ambitious objectives in terms of adjusting the accounts, it is the invitation of Victor Gaspar, director of the IMF Budget Department at a press conference. “In our latest projections we indicated that public debt will decline, but very slowly, and remain well above the pre-pandemic level,” she explained. The recipe: reforms to accelerate growth and savings. “It is extremely important to dilute the debt gradually over time – she explained – but it is equally important that there is greater ambition in terms of adjusting the accounts and in the context of strengthening the objectives that the government sets itself”.
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Giorgetti: “The only extra deficit is the confirmation of the wedge cut”
The succession of warnings captures the minister Giancarlo Giorgetti in the midst of the passage of the budget deviation request in Parliament. “The rating agencies do their job and I respect them. When they read the budget law they will understand that the only thing we have done in extra deficit, apart from Ukraine obviously, apart from the things that do not depend on us, is exactly the confirmation of the cut in the contribution wedge”, said Giorgetti in response to a question on Fitch’s assessments and the IMF. “After that it is clear that whoever is the director of the International Monetary Fund has a different job than a politician”, added Giorgetti. “The IMF gives, let’s say, directives to governments. I have to deal with Parliament, and above all with the people and families who are suffering.”
The House gives the green light to the resolution on the deviation
The Chamber of Deputies, meanwhile, approved the resolution presented by the majority on the budget gap (6-58) with 224 yes and 127 no. For this an absolute majority of members was required. The vote is also coming to the Senate.