It must be avoided that the spending program expected in Pnrr "be disregarded", because this would have "consequences for growth of the economy indicated in the “Updating Note to the Economic and Financial Document. writes it theParliamentary Budget Office in a Focus published today on the prospects for public finance in the scenario with current legislation presented first in the Nadef and then in the Budgetary Planning Document, which Italy recently sent to the EU.
In particular, according to the PBO, “the implementation of the expected growth for investments in 2023 (+33,8 per cent) will require an extraordinary effort on the part of all the implementing bodies".
Deficit in swing in the coming years
As for the main public finance aggregates, theParliamentary Budget Office writes that "the deficit-GDP ratio it would drop to 5,1 per cent in 2022 (from 7,2 in 2021), to then drop again to 3,4 in 2023, rise again to just 3,5 in 2024 and fall back to 3,2 in 2025".
Debt: the decline slows down, but goes better than expected
Il debt-to-GDP ratio, however, "it would continue to drop significantly in 2022 as well (to 145,4 per cent, from 150,3 in 2021) and at a lower rate in each of the following years: to 143,2 per cent in 2023, to 140,9 per cent in 2024 and 139,3 per cent in 2025”. This path continuesUPB extension, "is more favorable than that indicated in the DEF, where at the end of the period the ratio was equal to over 141 per cent".
The primary balance returns to surplus two years in advance
The better than expected result on the debt front is also possible because the primary balance (i.e. net of interest expenditure) "would return to surplus as early as next year (0,5 per cent of GDP in 2023, 0,2 in 2024 and 0,7 in 2025), two years ahead of as provided for in the DEF”, reads again in the Focus of theParliamentary Budget Office.
The situation in 2025
Therefore, in 2025, the final year of the forecast, the deficit-GDP is still above the European threshold of 3 percent, while the debt-GDP is more than five percentage points higher than the pre-pandemic one of 2019. However, it must be emphasized that these data are contained in a forecast based on current legislation, which therefore does not consider the costs of unchanged policies (from contract renewals of public employment to the refinancing of international missions), nor any new provisions (such as a further round of against expensive energy).
UPB: "Beware of maneuvering spaces"
Consequentially, "maneuver spaces must be carefully evaluated that will be available – concludes theUPB extension – to guarantee at the same time the achievement of the economic policy objectives and the continuation of the path of repayment of the public debt-to-GDP ratio (both in the short and medium-long term)".
Read full text of the Focus Upb.
