A large part of the resources arriving from the Recovery Fund "will have to be returned", therefore, if "they are not used productively, the problems will not be alleviated but increased by the higher borrowing: the implementation of the Plan must be placed in the perspective of a strategy of progressive reduction of the weight of the public debt on the GDP”. This was the warning launched by Fabrizio Balassone, head of the Bank of Italy's Economic Structure Service, during a parliamentary hearing on the Recovery Plan.
The draft of the Plan to which via Nazionale refers is outdated, because the Draghi government will undoubtedly rewrite the document substantially. However, the central institution implicitly reiterates some concerns already expressed by Brussels on the approach given to the plan by the outgoing executive, which seemed oriented towards using most of the aid for rain subsidies. In this way – it is the reasoning – the resources would provide an immediate refreshment to businesses, but would not help create new jobs or increase productivity. Bankitalia therefore underlines the need to trigger a development process in the medium-long term, so that growth makes it possible to permanently reduce the debt/GDP ratio.
SPENDING IS NOT ENOUGH
"Increased public spending alone is not enough to provide the necessary incentive for a lasting increase in private accumulation, which is essential to ensure higher levels of growth – continues Balassone – Rather, the utmost attention is needed in the punctual definition of interventions and in the management of their implementation. It is necessary to proceed with a set of reforms that can support the development process beyond the short term, improving the effectiveness of public action, the environment in which business activity takes place, the functioning of the labor market. On this the indications present in the Plan are not yet adequately developed. However, it is a crucial component, to be completed within the very tight deadlines envisaged in the context of Next Generation Eu".
INVESTMENT, REFORMS AND GOVERNANCE
The Bank of Italy therefore enters into the merits, specifying that "investment in research and development can also have very significant positive effects on the total productivity of the factors and on the growth potential – explains Balassone – These effects will have to be strengthened with those that may derive from justice and public administration reformsas well as investment in human capital. The multiplier effects will be greater the more efficient the use of resources is; for this we need a clear discontinuity with the past, an intervention governance structure appropriate to the complexity of the enterprise”.
- On the same topic read also the position of Assonime.
GDP FORECASTS
As for the macroeconomic forecasts, on the basis of the current draft of the Recovery Plan "it can be estimated that the level of GDP could increase up to almost 2 percentage points by the two-year period 2023-24, a value substantially in line with what is indicated in the draft of the Plan”, concludes Balassone.
According to a simulation byParliamentary Budget Office, on the other hand, "the expansive effect of the Ngeu program on the Italian economy would be almost uniformly distributed in the period considered, reaching over one percentage point of GDP within the first three years (2021-23) and a further increase of similar size in the following three years ”, explains Chiara Goretti, member of the Upb Council, before the House and Senate Budget Committees.
“Overall, at the end of the programming period, in 2026, the use of Ngeu resources would raise Italy's GDP by about 2,5 percentage points – continues Goretti – In comparison with the estimates, also preliminary, presented in the Pnrr, it can be observed that in the first three years of the simulation horizon there would be no significant misalignments with those of the Upb, while in the following three years the expansive effects presented in the Pnrr tend to be higher: at the end of the period of the year, GDP would be above that of the baseline scenario by three percentage points in the estimates of the Pnrr and by almost 2,5 points in the Pnrr exercise”. The growth forecast in the latest draft of the Recovery Plan therefore exceeds the estimates of the Parliamentary Budget Office by more than half a percentage point.
"There can be many reasons for this variance - concludes Goretti - The evaluation of the Pnrr is based on the hypothesis that the expenditure is of high quality and efficiency, in order to structurally increase productivity and therefore the growth potential in the medium-long term . However, these qualitative characteristics of the expenditure cannot be assessed at the current stage of defining the plan".
