Italy’s Economic and Financial Outlook for 2024

The Economic and Financial Document, which has been approved by Parliament, forecasts GDP growth for 2024 at +1%, a slight decline from the 1.2% predicted in the Nadef last autumn. This decrease is attributed to various factors such as international geopolitical tensions, including conflicts in Ukraine and Gaza, tension in the Red Sea, inflation, and high interest rates. Additionally, the unloading of building bonuses intended to spur economic recovery after the Covid-19 pandemic has also had an impact.

This is the final Def outlining the programmatic framework of public finance for the next three years under current methods. The new European rules coming into effect by September 30th have led to its division into two distinct documents, with this one focusing solely on evaluating the current framework rather than the programmatic one. This decision has been criticized by opposition parties who argue that it delays important decisions regarding fiscal policy and economic planning until after the European elections.

The debate between the Commission and Chamber has centered on the impact of Superbonus and building bonuses on public finances, with concerns about their weight limiting public spending for future years. While some members of government deny these constraints’ negative effects on public finance, others defend them as a means of generating economic leverage. Eurostat is expected to provide guidance on how to distribute these measures’ weight in June.

The high debt/GDP ratio is seen as hindering growth, with public administration debt projected to reach over 3 trillion euros by 2025. The tax burden is expected to decrease to 42.1% of GDP in 2024 but then increase to an average of 42.3% over the following three years due to inflation concerns. The latest budget law focused on extending tax cuts for lower-income earners up to €35k until 2024 in an attempt to counteract inflationary pressures.

Uncertainty regarding future public finances continues to pose a challenge for policymakers due to discussions about avoiding tax increases while ensuring that measures like tax cuts are extended further into post-election periods.

In conclusion, despite being criticized for its lack of forecasts and delayed decision-making due to election interference, this Economic and Financial Document remains critical in guiding Italy’s financial policies over