Confirmation of the cut to the tax wedge on labor also in 2024; first phase of tax reform; support for families and parenting; continuation of contract renewals in the public sector, also with particular reference to healthcare; confirmation of public investments, with priority to those of the Pnrr; refinancing of unchanged policies. These are the interventions envisaged by the budget bill that the Government intends to present, underlines Palazzo Chigi at the end of the Council of Ministers which, on the proposal of the Minister of Economy and Finance Giancarlo Giorgetti, approved the Note updating the Economic and Financial Document (Nadef) 2023, which outlines the scenario under current legislation without defining the public finance policy objectives for the three-year period 2024-2026.
Downward revision of GDP and support for families
The Nadef prepared by the Government, we read in the note from Palazzo Chigi, takes into consideration the complex international economic situation, the impact of the restrictive monetary policy, with the increase in interest rates, and the consequences of the war in Ukraine. The public finance framework reflects a prudent approach, with a revision of growth estimates for 2023-2024 due to the ongoing economic slowdown. This slowdown and the trend in inflation, however, require a policy of support for the real incomes of families, in particular those with lower incomes. Also thanks to the confirmation of the cut in the tax wedge on labour, the tax burden for 2024 is expected to reduce. In any case, the objective of reducing the tax burden more decisively during the legislature remains confirmed.
Although the net debt in relation to GDP will be revised upwards in particular in 2024, it is underlined in the note from Palazzo Chigi, “the prefigured structural adjustment and the trend of the reference expenditure aggregate are in line with the Recommendation of the European Council and with what is believed to be the future structure of the budgetary rules of the European Union. Furthermore, the measures adopted to contain public spending will be incisive”. As regards the debt profile, “it is noted that the construction bonuses in particular lead to a substantial increase in public needs during the legislature. Nonetheless, the planning of budget balances and the efforts to valorise and subsequently partially privatize some public assets will allow us to achieve a moderately declining profile of the debt/GDP ratio over the Nadef time frame”.
Subsequently, we read in the note, “the public finance balance achieved at the end of the period and the elimination of the negative effects on the cash balance due to the Superbonus will make it possible to obtain a much more rapid decline in the debt/GDP ratio, with the aim of return to pre-crisis levels by the end of the decade. The budget balance reflects the increase in the stock of public debt resulting from the deviation measures adopted in the pandemic period”.
GDP growth is estimated at 0.8 percent in 2023, 1.2 percent in 2024 and, respectively, 1.4 percent and 1 percent in 2025 and 2026. Regarding the objectives of net debt in relation to GDP, the document indicates a trend deficit under current legislation of 5.2 percent in 2023, 3.6 percent in 2024, 3.4 percent in 2025 and 3.1 percent in 2026 In the programmatic scenario, the deficit is 5.3 percent in 2023 and 4.3 percent in 2024. Regarding the projections for 2025 and 2026, the document forecasts 3.6 percent and 2.9 percent respectively. hundred. The public debt-to-GDP ratio for 2024 is forecast at 140.1 percent.
The unemployment rate is expected to fall to 7.3 percent in 2024 (from 7.6 percent forecast for 2023).