The International Monetary Fund remains quite optimistic about Italy, keeping forecasts in line with those of other national and supranational economic institutions, which also recently cut their growth estimates. This is what is contained in the latest report on the mission to Rome, during which Rishi Goyal, head of the Fund's mission in Italy, also spoke on the reforms and situation of the banking system.
ESTIMATES – According to the Washington Institute, which revised its previous estimates downward, Italy will grow this year "by just under 1%" and in 2017 by "about 1%", compared to 1,1% for 2016 and 1,3% for 2017 and 2018 previously predict yourself. The recovery should be driven above all by domestic demand, which is expected to grow by 1,3% throughout the period, while exports should accelerate only in 2017. Inflation is at zero but could show some signs of vitality in the 2017 (0,7%), while unemployment should continue to fall reaching 10,9% next year.
BREXIT – Brexit is also conditioning the downside, in addition to the refugee problem and other factors of uncertainty such as market volatility and the slowdown in world trade. “Downside risks have grown somewhat,” the document reads, although Rishi Goyal specified that the Fund's downward revision of estimates “it's not something that has a direct link to the UK, which is relatively limited on both the trade front and the financial sector exposure. In general, it is the increase in volatility in financial markets and greater uncertainty that is likely to weigh on investment and growth in Italy. Long-standing structural rigidities and frayed bank balance sheets with high public debt (close to 133% of GDP) leave little room to weather shocks.
REFORMS – However, there is no shortage of good news: the Italian authorities, according to the IMF, have "the situation under control, since they are carrying out a very important set of reforms in various areas". For Goyal "now is the right time to broaden and make these reforms even more effective so that they lead to a package of structural reforms and pro-growth fiscal measures that can boost growth in the short term". In doing so, concluded the Fund's head of mission, "the fiscal cushions that make growth more robust and more tools or the useful space to be able to face adverse shocks can be created".
BANKS – According to Goyal of the International Monetary Fund, the intervention of the Italian government in support of the nation's credit institutions "is an option within the existing rules". Goyal explained that the EU rules on the so-called bail-in provide for "adequate flexibility when financial stability is at risk" and therefore the Bank Recovery and Resolution Directive (BRRD, which transfers the cost of crises from the public sector to shareholders and holders of other bank liabilities) is able to manage the problems associated with Italian banks, which among other things at the end of the 2015 were weighed down by 360 billion euro of non-performing loans or 18,1% of total loans.
For the representative of the Fund "it is up to the discretion of the Italian authorities and the European Commission to find a solution in the event that a bank requests a restructuring, which presupposes a certain division of costs within the framework (of the BRRD) to support the rescue ”. The point therefore, for the Fund, is how European authorities and institutions will best discuss to find the best solution on this. As for the npl – of which 210 billion euros of the total calculated by the Fund are in a state of insolvency – the resulting concerns “are justified and taken seriously by the authorities”.
But, finally, the Fund's report argues, "they should not be overestimated also because there has been progress thanks to a series of measures adopted by the Italian government". The institution led by Christine Lagarde also argues that the Atlante Fund - the instrument created in Italy in the private sector to facilitate the recapitalization and management of non-performing loans of credit institutions - "although with relatively modest resources at the moment, can demonstrate That the purchase of 'bad debt' at a price higher than that now offered by specialized investors can in fact produce attractive returns”. According to the IMF, "the more the Atlante fund is successful, the more it will become possible to collect new resources by creating a virtuous circle".
RENZI - The reaction of the Prime Minister after the publication of the revised data was not long in coming: "They all reduced the estimates after Brexit: it's a bad thing that there was this result, the damage, alas, we will feel with a small slowdown of the economy but the impression is that for the British it will be a big problem. In the medium term it will hurt them more than us”. Thus, at Rtl 102,5, Prime Minister Matteo Renzi commented on the reduction in growth estimates for Italy by the International Monetary Fund, also as a consequence of Brexit.
