# Italy slashes 2023 growth forecast but sees public finances improving Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-28 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Italy Slashes Economic Growth Forecast for 2022 Meta Description: Italy's economic outlook worsens due to energy costs, but strong revenues expected, offering improvement in public finances. New projections highlight URL: https://financedigest.com/italy-slashes-2023-growth-forecast-but-sees-public-finances-improvinghtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-28t184018z2lynxmpei8r0u2rtroptp4italy-economy-package-1736815134664-compressed.jpg) By Giuseppe Fonte and Gavin Jones ROME (Reuters) – Mario Draghi’s outgoing Italian government on Wednesday slashed next year’s economic growth forecast to 0.6% due to sky-high energy costs but said strong revenues would still ensure an improvement in public finances. Gross domestic product in the euro zone’s third largest economy will “decline slightly” over the second half of this year, a government statement said. The new [growth projections underscore the economic](https://www.financedigest.com/addressing-the-credit-gap-to-unlock-economic-growth-in-africa.html "Addressing the credit gap to unlock economic growth in Africa") headwinds facing Giorgia Meloni, who led a right-wing alliance to victory at elections on Sunday and is expected to be named prime minister next month. The Treasury’s annual Economic and Financial Document (DEF) said GDP would expand 3.3% in 2022, up from a 3.1% [forecast set](https://www.financedigest.com/pharmaceutical-packaging-equipment-market-set-to-surge-significantly-during-forecast-period-tmr-insights.html "Pharmaceutical Packaging Equipment Market Set to Surge Significantly During Forecast Period – TMR Insights") in April, thanks to buoyant growth over the first six months. The 0.6% forecast for [next year signals a dramatic worsening in the outlook](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") compared with the previous goal of 2.4%. Draghi has already earmarked some 66 [billion euros](https://www.financedigest.com/eu-seeks-clarification-on-italy-post-covid-plan-freezes-19-billion-euros.html "EU seeks clarification on Italy post-COVID plan, freezes 19 billion euros") ($64 billion) since January to try to soften the energy crisis exacerbated by Ukraine war. His successor will probably have to move along the same path. Now serving in a caretaker capacity, Draghi penciled in the forecasts under an unchanged policy scenario. Meloni may set new [targets shortly after taking office if she believes her promised tax](https://www.financedigest.com/britains-tax-take-risks-blowing-green-energy-off-target.html "Britain’s tax take risks blowing green energy off target") cuts and spending measures can stimulate the economy. DEFICIT, DEBT TO FALL Despite the weakening growth outlook, [record-high inflation](https://www.financedigest.com/scrapping-outdated-payday-cycles-to-battle-record-high-inflation.html "Scrapping outdated payday cycles to battle record-high inflation") is helping to bring down Italy’s huge public debt as a proportion of nominal GDP. At the same time, the surge in oil and gas prices is [boosting revenues from value](https://www.financedigest.com/how-a-garden-can-boost-your-property-value.html "How a garden can boost your property value") added tax and excise duties. The DEF sees the budget deficit at 5.1% of GDP in 2022, sharply down from a previous target of 5.6%, while the [forecast for 2023 is cut](https://www.financedigest.com/michael-kors-owner-capri-cuts-forecasts-as-demand-slows-shares-plunge-20.html "Michael Kors owner Capri cuts forecasts as demand slows, shares plunge 20%") to 3.4% from 3.9%. This gives Meloni room for expansionary measures worth around 0.5% of GDP this year and [next without raising the deficit levels](https://www.financedigest.com/fime-launches-the-next-generationof-its-emv-level-3-test-platform.html "FIME launches the next generationof its EMV Level 3 test platform") above the previous targets. The forecasting document sees the fiscal gap declining very gradually to 3.2% in 2025, still above the European Union’s 3% ceiling which has been temporarily suspended to help the bloc’s [economies recover from the impact of the COVID-19 pandemic](https://www.financedigest.com/uk-economy-finally-bigger-than-before-pandemic-in-november.html "UK economy finally bigger than before pandemic in November"). Italy’s public debt, proportionally the second highest in the [euro zone](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows") after Greece’s, is seen at 145.4% of GDP this year, down from a previous forecast of 147.0%. It is targeted to decline to 143.2% in 2023. Inflation, measured using the consumption deflator, is seen averaging 6.6% this year and 4.5% in 2023. The DEF also said that Italy had so far managed to [spend around 21 billion euros](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros") of European Union pandemic recovery funds. That leaves a further 170 [billion still to be invested](https://www.financedigest.com/shell-to-evaluate-25-billion-pound-british-investments-after-windfall-tax.html "Shell to ‘evaluate’ 25 billion pound British investments after windfall tax") through 2026, provided Rome can meet the policy “targets and milestones” agreed with Brussels as a condition for disbursing the money. ($1 = 1.0314 euros) (Editing by Toby Chopra) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---