- Italy `turned the corner' in 2015, with 2016 acceleration seen
- Refugee crisis will bolster budget flexibility request to EU
Prime Minister Matteo Renzi presented a draft budget plan that boosted growth projections for post-recession Italy as he prepared to seek a wider margin from Brussels on next year’s deficit-reduction goal.
“This is the moment in which we must push forward with even more determination because objectively the recovery has started in Italy thanks to the measures and the reforms” the government has undertaken, Renzi told a news conference on Friday night in Rome. “In 2015 we turned the corner, in 2016 we will accelerate.”
The budget plan, approved at a cabinet meeting, revises this year’s growth forecast upward to 0.9 percent from 0.7 percent in April, while next year’s estimated growth was raised to 1.6 percent from the 1.4 percent previously targeted.
The deficit to gross domestic product ratio will be at 2.6 percent this year, and 2.2 percent next year, Finance Minister Pier Carlo Padoan said, against 2.6 percent and 1.8 percent seen in April.
Padoan said faster growth was due to both reforms and “an international context which is favorable but won’t always be." He pointed to "a virtuous circle which feeds off itself” with higher growth which was "more robust, more lasting, with higher confidence."
With the government needing to fund tax cuts of 35 billion euros ($39.6 billion) over three years aimed at boosting the economy, Padoan said Italy will obtain budget flexibility from the European Union, under clauses on reform and investment. He said Italy will also invoke at a later stage the pressure of the “momentous influx of migrants” which may translate into a further widening of the deficit.
The flexibility and a higher deficit “will mean a lower debt reduction” than indicated in the draft budget plan, Padoan said. “We’ll still be able to meet the target” on debt reduction requested by the EU rules, he added.
Italy’s new GDP-growth estimates compare with less optimistic projections released on Wednesday by the Paris-based Organisation for Economic Cooperation and Development. In its interim forecasts for the global economy the OECD said the Italian economy will expand 0.7 percent in 2015 and 1.3 percent in 2016.