Home » Visco: debt down to 150% of GDP, rebalance public finances with the recovery. The inflation tax

Visco: debt down to 150% of GDP, rebalance public finances with the recovery. The inflation tax

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ROMA – The economic recovery, which will be consolidated in 2022, requires a “structural rebalancing of public finances”, which is also necessary to avoid tensions on the government bond market. The governor of the Bank of Italy says so, Ignatius Visco, in his speech today at the Assiom Forex Congress in Parma. Which, however, underlines a great and to some extent unexpected success: the reduction of public debt in relation to GDP, which at the end of last year stood at around 150%.

A much better trend than in 2020, when it had settled at 156%, better than the government estimates last autumn and, as Visco recalled, 10 points better than forecasts (“ours too”, he added speaking off the cuff in front of bankers) who “saw it close to 160% of GDP at the end of 2021”.

The governor approves of the expansive nature of the budget maneuver, which serves to support this recovery. A right move in light of the tailback of the pandemic, even if “it determines an increase in net debt, compared to the framework under current legislation, of about 1.3 per cent of GDP on average per year in the three-year period 2022- 24 “.

The main unknown of course is inflation, “which is a hidden tax” on households and businesses. So far in Europe, unlike in the United States, it has been an inflation of energy prices, supplies and transport costs, but the governor strongly emphasizes that at this point an inflationary spiral must be avoided: it would be worrying if the increases in prices were reflected in wage increases, in an unbridled run-up.

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The Bank of Italy believes that it is energy shock which also invests Italy and with it the rush of inflation will be “largely” reabsorbed in 2023. Meanwhile, the measures of over 5 billion euros taken by the government last year have made it possible to contain the increases in electricity and gas tariffs for users of the protected market, equal to 12 and 10 per cent respectively on average for the year.

Visco warns: “At the beginning of this year the cost growth has intensified: despite the further ones support interventions decided in December, in the first quarter the electricity and gas tariffs should increase, respectively, by 55 and 42 percent compared to the last three months of 2021. “Giusti, therefore, new interventions by the executive, which are being studied .

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In this scenario of lights and shadows, Italy will have a growth in GDP this year around 4%, and then diminish in the next two. “In 2021 the recovery of the world economy was higher than expected. Production activity in Italy also surprised positively, however in recent months growth has been slowed by the new wave of infections. But since the spring, with the gradual improvement of the picture health, should regain vigor “.

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On the banking front, Visco observes: “The gradual disappearance of the measures to support the economy”, for example with the moratoriums of the Cura Italia decree which ended at the end of 2021, “may lead to an increase in the flow of impaired loans, with the consequent need to account for the related losses. However, the growth in insolvencies should be significantly lower than that recorded in previous recessions “.

The capital situation of Italian banks “remained solid at the end of last September”, but “cases of fragility remain, mainly at small to medium-sized banks and with a traditional business model. For many of these, low credit quality is compounded by difficulties in containing costs and in responding to the challenges of technological innovation “.

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