Italy is really playing its future with the efficient use of the resources of the Recovery Fund-Next Generation EU. This is what emerges from the Prometeia report that has just been issued.
In the analysis, two scenarios for the Italian economy are presented. In the baseline scenario it is assumed that “the use of European funds facilitates the implementation of some of the reforms that for years the Italian economy has struggled to adopt, as well as initiate reallocations towards more innovative sectors, thus favoring a recovery in productivity ”.
The first scenario therefore contemplates the use of the resources of the Next Generation EU together with the launch of the structural reforms which Italy takes too long. In this case, as emerges from the Prometeia report “Italy in 2030 bridges growth gap with Europe if NGEU is fully exploited”, in 2030 “the level of Italian GDP could be above that of 2019 by 10.5%, with a public debt at 135% of GDP: a cautiously optimistic outlook which, in the second half of the decade, sees growth in per capita GDP in line with that of the major countries in the area ”.
Consequently, “after a quarter of a century of growth below that of the main European partners, we may therefore no longer be the ‘Achilles heel’ of the Eurozone, despite not being able to recover the distance that has opened in the meantime ”.
The second scenario implies “a path in which the use of European funds translates into one temporary stimulus of demand, not accompanied by structural reforms or able to initiate a productive transformation towards sectors with higher levels of productivity ”. In both scenarios, Prometeia assumes “a monetary policy that remains ultra-accommodative”.
In the case of the second scenario, “the absence of structural reforms it practically means that the potential of resources deployed by Europe is not fully grasped, preventing the Italian economy from filling the growth gap that has gradually formed over the last 25 years ”.
In this situation, “GDP would be higher than the 2019 level by only 5.8%, with public debt still at 151% of GDP. A scenario that is not dramatic, but one that nevertheless relegates us, perhaps definitively, to the weak economies of the area ”.
In the short term and for the Italian GDP, Prometeia foresees a growth of 4.7% in 2021, and an average annual expansion rate of + 3.8% in the period 2021-2023, followed by an average annual rate of + 1.2% in 2024-2030.
For the GDP of the Eurozone, in the 2021-2023 period, analysts estimate an annual average growth rate of 3.6%, followed by an annual average + 1.3% in the 2024-2030 period.
For the world GDP, the estimates are for an average annual growth of 4.6% in the 2021-2023 period and 3.2% in the 2024-2030 period.
2020, with Covid worst Italy recession in times of peace
This is how Prometeia takes stock of the conditions in which the Italian economy finds itself and the prospects in the short term:
“The pandemic leaves a legacy for Italy the worst recession in times of peace, with an 8.9% fall in GDP in 2020 ″. The balance sheet is creepy: “During the year 150 billion euros of GDP were ‘lost’, 108 billion of consumption, the employed are 435 thousand less, public debt has gone from 27.9 billion to which dropped to 156.3 billion in 2019 “.
At this point the question, for Italy now led by former ECB president Mario Draghi, is the following:
“How much has been done by the policies will be enough to make this crisis really different from any other also for the speed with which it will come out? The debate is open – writes Prometeia – in the meantime we observe that the size of the fiscal impulses for Italy is in any case significant from a historical perspective: after 6.6% of GDP due to expansionary policies from 2020 (108 billion), 2021 is moving towards a slightly lower impulse, equal to 5% (85 billion). To this must be added the contribution that can come from the NGEU, which we estimate at around 10 billion in the current year ”.
It is recalled that “they are potentially allocated to Italy 209 billion euros to be spent in six years. For Italy, Prometeia estimates that the additional expenses (therefore not those already planned) financed with these funds are equal to 120 billion, using all the non-repayable subsidies available (81 billion) and about 40 billion in loans, which would however be used. only starting from 2024. A total amount in line with the National Recovery and Resilience Plan (PNRR) which, however, is still being defined. Despite the desire expressed by the previous government to spend at least 81 billion of these additional resources in the first three years, and despite the commitment of the new executive to innovate the procedures to make them more effective, we adopt a hypothesis of caution that in 2021-2023 it considers a realization of about 70% of what was planned. This is due to the criticalities in the implementation of the works, evident in the delays of the past “.
“The contribution to demand will be on average one point of GDP per year, which will be added to the post-pandemic rebound and the fiscal policies of the Italian government. The stimulus would be important but not sufficient to allow a full recovery of pre-crisis levels before the fourth quarter of 2022. We will do worse than other countries (Germany and France) but much better than in the past two crises, when the pre-crisis levels were not still recovered in 2019, more than 10 years after the first one broke out. In this context, the BTP-Bund spread could drop below 90 basis points at the end of 2023 ″.
The current Prime Minister Mario Draghi managed to bring the spread down to below the 100 point threshold in early February, when he had not yet officially become the head of the Italian government. A name, a guarantee, many have said. In the last hours the Prime Minister, Mr Whatever It Takes at the time when he was president of the ECB, the man who saved the euro in the period of the sovereign debt crisis, returned to talk not only about Italy, but also about Europe, relaunching theidea of eurobonds. An idea in the past punctually ditched by the North Axis but that with Draghi, perhaps, this time could no longer be sent back to the sender, and perhaps concretized.