The recovery of Italian GDP in 2021 will be slower than expected, i.e. the +6% estimated by the government in the update note to the Economics and Finance Document. This was stated by Eugenio Gaiotti, Head of the Economics and Statistics Department of the Bank of Italy, during a parliamentary hearing on budget maneuver. It is true that in the third quarter "growth was higher than expected, and this indicates that our economy retains a significant capacity for recovery", explained Gaiotti, but "the resurgence of the pandemic and the necessary restrictive measures are having an impact on the economy. Economic activity is weakening in Italy: according to our surveys in the fourth quarter a drop in GDP is plausible, even if decidedly more contained than in the spring, and it is probable that the annual result will be in line with expectations”. However, “2021 growth is likely to be lower than expected in early autumn”.
In this context, Gaiotti continued, “an effective and timely response to the emergency is necessary. Part of the resources of the budget law is appropriately allocated to support the most vulnerable families and the most affected economic sectors. Preserving companies that are temporarily in difficulty but fundamentally sound is essential to prevent the crisis from having permanent repercussions; protecting household incomes is essential, as well as to counter a rise in inequality, to support demand, in an economic situation that remains weak and uncertain. In perspective, once the emergency phase has passed, the costs of extending the various measures will need to be carefully evaluated. However, it is essential to combine emergency interventions with broader measures in order to return to stable growth at a sustained pace”, and this is possible using European resources.
On the public finances front, Gaiotti underlined the need to “a progressive and lasting recovery from the high debt/GDP burden, which will require maximum attention to the quality of the measures being defined and an effective use of borrowed funds and those made available by European programmes, as well as the necessary budgetary adjustment when the macroeconomic framework is more favourable”.
In any case, “the size of the expansive impulse of the measures that the Government plans with the maneuver is significantly larger than that measured by the change in net debt; it can be estimated that it is of the order of about 2 percentage points of GDP on average per year in the next two years (to then become equal to 1,3 points in 2023). It should be remembered that a less favorable economic trend than expected and any delays in the definitive approval of the European program and in its implementation would have significant effects on coverage”.
For the tax authorities, the Bank of Italy deems it necessary "a revision of the system that recomposes the tax burden to the benefit of the factors of production and takes into account the changes that have affected the system of social transfers, recalling in particular the need for a comprehensive reform. This is an important step that will require particular care in assessing the distributive effects and those on household work and consumption decisions, as well as on the investment choices of businesses".
Finally, Gaiotti said that universal allowance “It is an important institution. The details of the grant will be defined on the basis of a careful evaluation of the efficiency and equity profiles. In particular, the opportunity to contain the disincentive effects to the job offer that could derive from the use of the ISEE and the possibility of correcting the penalty for the children of numerous families who benefit from the Citizenship Income, with which the the allowance will be jointly disbursed”.
