Italian public finances improve in 2021 as growth rebounds | Investment News

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By Gavin Jones and Giuseppe Fonte

ROME (Reuters) – Italy’s economy grew 6.6% last year after a record contraction of 9.0% in 2020, while the budget deficit and public debt are below government targets, reported Tuesday the ISTAT statistics office.

For the third year in a row, Rome’s budget deficit was significantly lower than official forecasts as three different governments overestimated the cost of measures to increase social protection and support the economy.

The 9.0% contraction in gross domestic product in 2020, caused by prolonged coronavirus shutdowns, has been revised slightly from -8.9% previously reported.

Last year’s rebound was stronger than initially expected by the government, which repeatedly revised its GDP forecast upwards during the year.

The end result of 6.6% was higher than the last official target of 6.0% set last September and also slightly higher than the last indication of 6.5% given by Economy Minister Daniele Franco.

This year, Prime Minister Mario Draghi’s coalition government has forecast growth of 4.7%, but the outlook has been clouded by soaring energy prices and geopolitical unrest related to the war in Ukraine.

Additionally, a resurgence of the coronavirus earlier this year is expected to have dampened growth in the first quarter, kicking off the year with a poor start.

In recent comments, ministers have insisted that growth will always be above 4%.

Italy’s budget deficit stood at 7.2% of GDP last year, ISTAT said, well below the official target of 9.4% and down from the ratio of 2020 by 9.6%.

“Growth was stronger than expected at the start of the year and that means tax revenue was more than 20 billion euros ($22.31 billion) higher than we expected,” he said. said a government official familiar with the matter, on condition of anonymity.

In addition, spending fell short of the target by more than €10 billion due to lower spending on wages, public procurement, social protection and subsidies to businesses affected by COVID-related restrictions. -19, the official said.

Draghi aims to lower the deficit to 5.6% of GDP this year.

Public debt – proportionally the highest in the euro zone after that of Greece – fell to 150.4% of GDP in 2021 against a government target of 153.5%. This figure was down from the all-time high of 155.3% in 2020.

A further reduction to 149.4% is planned for this year.

(writing by Gavin Jones; editing by Bernadette Baum)

Copyright 2022 Thomson Reuters.

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