Nadef, reviews GDP and deficit, narrow path for maneuver

In 2023, gross domestic product could grow by 0.8%, compared to the 1% indicated in April. The forecast for 2024 has also been lowered to +1%

Review coming for growth and public finances. The update note to the Def expected from the Council of Ministers tomorrow would indicate a reduction in the GDP estimate and an increase in the deficit estimate but the government’s prudent budget policy should help reassure the markets. From the war in Ukraine to the ECB rate hike, from the delays in the Pnrr to the superbonus mine, the Italian economy is burdened by exogenous and endogenous variables that cause a pincer effect on the post-Covid recovery, limiting the margin for maneuver of the next Budget Law.

In the Nadef, as far as we know, the GDP would be cut to +0.8% in 2023 against the 1% (programmatic) indicated in April; in 2024, however, the trend growth would be lowered to +1% from +1.4%.

Revision also coming for the deficit, after Eurostat’s decision to evaluate the expenses of the 2023 super bonus as ‘payable’, therefore to be all accounted for this year, bringing the bar for this year’s programmatic deficit to just above 5% from the previous estimate of 4.5 %. For 2024, however, Eurostat is waiting for the first part of next year to decide whether it will be possible to apply the ‘non-payable’ principle; in this case the expenses would be spread over the years of duration of the tax credit.

Meanwhile, for 2024 the government should review the deficit estimate, exceeding the programmatic threshold of 4% to find resources for the budget maneuver. The impact is on the decline in GDP which leads to an increase in the trend deficit of 3.5% indicated in the spring, eliminating the 4.5 billion euro treasury due to the margin with the programmatic deficit of 3.7%. Raising this last estimate would free up new resources to finance the interventions of the Budget Law.

In general, regarding the Nadef at the Mef, the offices have calculated various hypotheses which would now be examined by the Minister of Economy Giancarlo Giorgetti, awaiting the decision tomorrow at the Council of Ministers.

There is also great anticipation for the debt estimate, the one that investors look at when deciding whether to buy government bonds. The April forecast was 142.1% in 2023 and 141.4% in 2024.