door businessam.be
published on Thursday, October 10, 2024 at 6:45 PM •
3 min read
Key takeaways
- One of the main goals of the plan is real GDP growth of 1 percent by 2024.
- Reducing the budget deficit to 3.8 percent by 2024 and below 3 percent by 2026 is also a goal.
- Maintaining a primary surplus of 0.1 percent in 2024 is another goal of the PSB.
The Italian government has unveiled a comprehensive plan, the “Piano Strutturale di Bilancio” (PSB), designed to tackle the country’s long-standing debt problem and get through the European Union’s Excessive Deficit Procedure (EDP) by 2026. The plan sets ambitious targets for deficit reduction, public investment and debt stabilization. Key objectives include achieving real GDP growth of 1 percent in 2024, reducing the budget deficit to 3.8 percent in 2024 with a target of less than 3 percent in 2026, and maintaining a primary surplus of 0.1 percent in 2024.
However, achieving these objectives requires striking a balance between fiscal discipline and economic reforms. While the PSB emphasizes public investment through Italy’s National Recovery and Resilience Plan (PNRR), which is expected to increase GDP by 1.1 percent by 2031, it also recognizes the need for private sector involvement in long-term investments, particularly in green energy and infrastructure. This requires structural reforms to remove barriers to private investment.
Challenges and concerns
Economists have been both positive and cautious about the PSB’s fiscal consolidation measures. While recognizing the government’s commitment to fiscal responsibility, some experts warn that aggressive spending cuts could negatively impact economic growth. Concerns include the potential increase in borrowing costs from 2025 and the continued impact of construction tax credits issued between 2021 and 2023, which are expected to add more than 2 percent of GDP to annual debt issuance through 2027.
Way forward
The Italian government faces a delicate balancing act to achieve fiscal stability while promoting sustainable economic growth. The PSB’s success will depend on its ability to effectively manage these competing priorities and navigate the complex economic landscape in the coming years.
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