Italy’s economy will rebound more powerfully than expected in the third quarter after suffering one of Europe’s toughest lockdowns, Finance Minister Roberto Gualtieri said.
Output will expand more than the 9.5% forecast in the government’s latest financial plan, Gualtieri said in an interview at the Ambrosetti Forum in Cernobbio, northern Italy, on Sunday. This is significantly above the 7.9% median of forecasts compiled by Bloomberg and would set the economy on a faster recovery path amid a lesser spike in new infections than European peers.
“The emergency measures we took had the objective of supporting the production system, employment and incomes,” Gualtieri said. “They were decisive to enable the Italian economy to restart, as is happening now.”
Even so, gross domestic product will only return to its pre-coronavirus level in 2022, he added.
Gualtieri also disclosed that an updated public finance plan to be presented in coming weeks will set a “significant” long-term target for reducing debt. Italy’s already large debt burden is expected to exceed 150% of gross domestic product after the pandemic forced it to borrow 100 billion euros ($118 billion) for emergency stimulus programs.
“We will present at the end of September our fiscal document, which will have not only a three-year horizon but also a longer-term horizon where we will define a trajectory of reduction of our debt/GDP ratio that will be significant and sustainable,” he said. This will be achievable through medium-term fiscal measures and investment in production with European Union recovery funds, he said.
Prime Minister Giuseppe Conte’s government is under pressure to switch the focus from protecting jobs and businesses to kickstarting growth. It’s now drafting projects for Italy’s expected 209 billion-euro share of the EU’s recovery fund.
While acknowledging European Central Bank actions play a key role in controlling bond yields, Gualtieri stressed that the Italian economy’s solid fundamentals and low private debt are also narrowing spreads. The yield on 10-year bonds has more than halved since the peak of the pandemic in mid-March.
Gualtieri pushed back against investor criticism of the revival of big government in Italy. Conte and his ministers have toughened veto powers on foreign investments and have intervened in sectors ranging from highways to broadband networks.
“The government is committed to tackling a series of issues that have been open for some time, with the prospect of forging market solutions involving public and private investment in the development of important infrastructure,” he said.
(Updates throughout with more comments and background)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.