“Growth is expected to enter a slower phase and downside risks dominate the outlook,” the IMF said in the conclusions of its annual ‘Article IV’ visit to Rome.
It forecast that gross domestic product in the euro zone’s third largest economy would rise 1.1% this year and 0.9% in 2024, slowing compared with last year’s buoyant 3.7% expansion.
“Policies that slow public debt reduction or prolonged delays in receiving NextGenerationEU (NGEU) disbursements could raise financing concerns”, the IMF said, while “a sharper tightening of monetary policy could transmit asymmetrically to Italy and further raise borrowing costs.”
This in turn could reduce funding availability, causing public and private spending to retrench and reviving concerns about sovereign-bank-corporate linkages, the Fund added.
Italy’s hopes of transforming its economy with billions of euros of NGEU funds are dwindling, businesses on the ground say, with inefficiencies at all levels raising the risk of a greater boost to debt than to growth.
Rome is behind schedule both in meeting the policy conditions agreed with Brussels and in spending the cash it has already received.
The IMF forecast that Italy’s public debt, proportionally the second highest in the euro zone after Greece’s, will decline to 140.5% of GDP this year, from 144.4% in 2022.
The average inflation rate, based on Italy’s EU-harmonised index (HICP) will fall sharply to 5.2% in 2023 from 8.7% last year, and ease further to 2.5% in 2024, driven by lower energy and food prices, the IMF said.
Most recent data shows Italy’s HICP inflation rate stood at 6.7% in June, decelerating from 8.0% the month before.
Source: Economy - investing.com
