Italy targets lower debt ratio this year as economy picks up – draft


By Giuseppe Fonte and Gavin Jones

ROME, September 29 (Reuters)Italy sharply lowered its public debt target for 2021 to 153.5% of national production, against a previous target of 159.8% set in April, according to a draft forecast document to be released by the Treasury.

Aided by a solid economic recovery after the COVID-19 crisis, the document shows that Italy aims to gradually reduce its gigantic debt ratio, which is the highest in the euro area after Greece.

The latest target would mark a drop from the post-war record 155.6% of GDP recorded in 2020, while the downward trend is expected to continue to 149.4% in 2022.

The draft half-yearly Economic and Financial Document (DEF), seen by Reuters, was approved by the cabinet on Wednesday and the new figures are expected to be released later today.

The project forecasts economic growth of 6.0% this year, a partial recovery after the record 8.9% contraction in 2020 when the economy was hampered by lockdowns from COVID-19.

Economic output will recover above its pre-pandemic level in mid-2022 thanks to another year of robust growth forecast at 4.7%, according to the project.

In the near term, the third quarter of this year will see growth of 2.2% from the previous three months, DEF forecasts, following a 2.7% expansion in the second quarter.

The document highlighted many risks to the growth outlook, including the possible emergence of new COVID variants, commodity shortages and the recent surge in energy prices.

Nonetheless, he said the expected return to pre-pandemic conditions, economic reforms and billions of euros in stimulus funds from the European Union should ensure that growth and jobs remain “well above average. trend observed over the last decade “.

Italy is the euro zone’s most sluggish economy since the start of monetary union.

The budget deficit is targeted in the DEF at 9.4% of GDP this year, little changed from last year’s level of 9.6% and down from an April forecast of 11.8% .

The deficit is expected to decline to 5.6% next year and settle at 3.3% in 2024, still above the 3% ceiling set in the European Union’s Stability Pact, which is currently suspended due to the COVID-19 crisis.

The 2022 deficit would be 4.4% of GDP in an unchanged political scenario, the DEF showed, allowing the government to finance additional spending of 1.2% of GDP, or some 22 billion euros (18.78 billions of dollars).

Prime Minister Mario Draghi and Minister of Economy Daniele Franco will present the DEF at a press conference at 14:00 GMT.

($ 1 = 1.1714 euros)

(Edited by Catherine Evans)

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