Live Markets: Italy's fiscal plan is doable, but only until 2027 - Citi

Covestro AG

01/10/2024 10:07

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    ITALY’S FISCAL PLAN IS DOABLE, BUT ONLY UNTIL 2027 - CITI
    Italy's debt outlook is under scrutiny from the ratings
agencies and markets, while the risk premium on its government
bonds remains the highest in the euro area periphery. 
    The new 7-year fiscal plan released last week projects net
primary expenditure growth, the new parameter used to assess EU
fiscal rules compliance, to stay close to 1.5% per annum, in
line with the EU Commission's target set for Italy.
    "The updated fiscal plans confirm the ongoing improvement in
Italy's fiscal performance, mostly owing to higher-than-expected
tax revenues," Citi analysts say in a research note.
    "The down-revision of the 2024-25 budget deficits by 0.5
percentage points of GDP is sizable by historical standards, and
it stands out when compared to deficit overruns elsewhere (e.g.
in France)," they add.
    "We reckon complying with these targets is doable over the
next two to three years, more challenging in the more medium
term (post-2027) as EU-financed fiscal support via NGEU will
fade," Citi analysts argue.
    The government led by Giorgia Meloni will be in charge for
five years from October 2022, assuming it serves its full term
without early elections.
    The Italian Treasury said in its multi-year fiscal plan that
Italy's public debt will only start falling as a proportion of
economic output from 2027, despite a more positive trend in
addressing its significant budget deficit. 
    
    (Stefano Rebaudo)
    *****
    
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