Italy’s economy minister sees lower growth, higher deficit next year

Italy’s economy minister said on Wednesday lower economic growth was expected to increase the country’s deficit next year and slow the reduction of its public debt, but he reiterated his commitment to a prudent fiscal policy.

Giovanni Tria said the government estimated the country would grow by 1.2 percent this year, lower than the 1.5 percent previously forecast. He also expected a downward revision of economic output to 1 or 1.1 percent next year from a previous estimate of 1.4 percent.

“This slowdown would bring the deficit to 1.2 percent in 2019,” he said in an interview with newspaper Il Sole 24 Ore. That would be higher than a deficit target of 0.8 percent of gross domestic product drawn up by the previous administration.

Tria added that a clearer estimate of the deficit would be available in September and would depend on the cost of servicing the debt and on the amount of revenues or expenditure cuts that the government will use to avoid an increase of sales taxes.

The worsening economic forecasts could put the new anti-establishment government on a collision course with the European Commission, which monitors the budgets of European Union countries.

But Tria, an academic who is seen as more moderate than many of his government partners, said all the reform measures included in the executive’s plans were “compatible” with the commitments Italy had with the EU over its public finances.

He said lower growth could slow the reduction of the country’s debt, the second highest in the EU after bailed-out Greece, but added that the government maintained the target of bringing the debt down.

source: Reuters