Italy reaffirms budget goals ahead of new economic forecasts

These incentives lay behind last year's deficit-to-GDP ratio of 7.2% which far overshot the government's target of 5.3%, and threatens to put Italy's huge public debt on an upward path from the 137.3% of GDP reported in 2023. Officials have previously said Rome could announce this week a set of estimates reflecting the current economic trends, without setting new goals.

Italy is ready to intervene in case it overshoots its budget goals but does not see the need at the moment, Economy Minister Giancarlo Giorgetti said on Monday, ahead of a new set of government economic projections expected this week. "If there is something to correct we will correct it, but basically we are in line," he told reporters on the sidelines of an event in Trieste, northeast Italy.

Italy last September set a downwards trend for the deficit-to-GDP ratio, seen falling from 4.3% expected this year to 3.6% in 2025 and returning below the European Union 3% ceiling in 2026. The cabinet is scheduled to meet on Tuesday to approve the Treasury's Economic and Financial Document (DEF) with updated growth and public finance estimates.

Uncertainty remains over the take-up of costly home renovation incentives, which opened a huge hole in state accounts in 2022 and 2023. These incentives lay behind last year's deficit-to-GDP ratio of 7.2% which far overshot the government's target of 5.3%, and threatens to put Italy's huge public debt on an upward path from the 137.3% of GDP reported in 2023.

Officials have previously said Rome could announce this week a set of estimates reflecting the current economic trends, without setting new goals. However, Giorgetti said the government was committed to meet "exactly" the multi-year targets announced in late 2022.

"Our policy is guided by prudence and responsibility," he said. Last week sources said the DEF would cut this year's GDP growth forecast to 1% from a previous 1.2% set in September.

For 2025, Rome now expects growth of 1.2%, down from a previous 1.4% goal, they added. Both forecasts are based on an unchanged policy scenario and are above those of the European Commission, the International Monetary Fund and the Bank of Italy, which all see Italian growth below 1% in each of the two years.

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