Italy’s public debt to start declining in 2027 – Treasury confirms

Italy’s public debt will start falling as a proportion of GDP starting from 2027, according to the Treasury’s latest multi-year fiscal plan, despite improvements in managing the budget deficit.

The eurozone’s third-largest economy, with the second-highest debt-to-GDP ratio in the bloc, remains under pressure from the EU’s “excessive deficit procedure” after the 2023 deficit hit 7.2 per cent of GDP.

The Treasury projects Italy’s debt will rise to 137.8 per cent of GDP by 2026 due to costly Covid-era incentives like the Superbonus, before marginally falling to 137.5 per cent in 2027.

Debt reduction will follow new EU fiscal rules, requiring gradual cuts in deficit and debt from 2025, with a targeted 1 per cent annual GDP reduction after exiting the excessive deficit procedure.

The government aims to limit net primary expenditure growth to 1.5 per cent annually. Economy Minister Giancarlo Giorgetti emphasised the need for a prudent fiscal policy to manage debt and interest expenses.

The fiscal plan forecasts GDP growth of 1 per cent in 2024, 1.2 per cent in 2025, and 1.1 per cent in 2026, aligning with earlier estimates. The budget deficit is expected to fall to 3.3 per cent of GDP in 2024 and 2.8 per cent by 2026, below the EU’s 3 per cent ceiling.