The governor of the Bank of Italy is looking to the future with optimism, thanks to the “progressive improvement of the health framework”. From the Parma Forex market he underlined the importance of growth for the decline in public debt: “Expansive maneuvers necessary to contain the reduction of the budget stimulus on growth”
The Italian economy should start to grow more quickly as early as next spring. The GDP, at the end of 2022, will mark a + 4%. These are the estimates of the governor of the Bank of Italy Ignazio Visco, who looks to the future of the Italian accounts with optimism. From the Forex stage in Parma, Visco said that “the progressive improvement of the health framework” will drive the recovery. “We must begin to think about a future to be consolidated and in which we must all participate with optimism, with an attempt to build the new which, in fact, is in our hands”, said Visco, underlining how – despite the temporary slowdown of the growth in recent months due to the new increase in coronavirus infections – the Italian economy is doing well. In fact, 2021 closed positively, with + 6.5% of GDP. This, says Visco, was decisive “to stop the increase in the ratio between public debt and product, which at the end of 2021 could have fallen to values close to 150 percent (from about 156 percent reached in 2020)”, a much lower value “than expected at the beginning of last year and also the official assessments published in the autumn”.
Growth and public debt
Visco stressed the importance of growth for the decline in public debt. In the presence of a better than expected primary balance, but still largely in deficit, “the decrease in the debt burden compared to 2020 reflected the large difference, negative for more than 5 percentage points, between the average interest burden and nominal growth of the economy ”, explained the governor of the Bank of Italy. “This result, despite the exceptional circumstances that determined it, with reference both to the recovery of activity levels after the deep recession and to the extremely expansionary monetary conditions, clearly shows the importance of economic growth for the pursuit of a gradual reduction of the debt burden “.
Growth and Maneuver
Visco commented on the latest financial maneuver, which “determines an increase in net debt, compared to the framework under current legislation, of about 1.3% of GDP on average per year in the three-year period 2022-24”. For the governor of the Bank of Italy, the way is the right one: “an expansionary maneuver” was deemed necessary by the institutions “to contain the risk that a premature reduction of the budget stimulus could have a negative impact on growth potential”.
Inflation: “Effect of price increases reabsorbed in 2023”
Also on the inflation front, Visco remains positive. “The unexpected increase in inflation recorded in the euro area in recent months is largely the consequence of a supply shock”, explained Visco, according to whom, “if there are no spirals between prices and wages and if expectations will remain firmly anchored to the ECB’s inflation target, as is currently happening, the effect of energy price increases will be largely reabsorbed in 2023 “. It will be the ECB that will accompany the euro zone in this process, with a monetary policy that will remain expansionary, “even if the gradual normalization will continue at a pace consistent with the recovery of the economy.” In any case, Visco said, it will be crucial “That the decisions are progressive and well thought out, also in order not to create uncertainties that could destabilize the financial markets and the recovery of the economy”.
Carobollette “basically a tax”
One of the most immediate effects of inflation is the increase in the cost of electricity and gas bills. The increase in energy costs, explained Visco, “is essentially a tax, probably largely destined to return, the most distorting effects of which can be offset, where possible, by public budgets”. Visco looks favorably on targeted interventions, both on the carobollette and to help economic sectors in difficulty, but is instead opposed to “generalized stimulus” measures, which would determine tensions on prices and risks “for the balance of public finances”. energy issue, also thanks to the increase in prices for energy derived from fossil sources, Visco believes it is important to “define in a short time a strategy, particularly at a European level, which considers the problem of diversifying energy sources, their storage and the identification of common resources for the management of energy crises: only in this way will it be possible to consistently address a problem that can hardly be solved with economic policies of a conjunctural nature “.