By Silvia Marchetti
ROME (MaceNews) – Italy’s government is expected to put forward on Wednesday a fiscal plan that sets the budget deficit at 10.8% of GDP this year and public debt at 158%, while the economy will contract by 9% on the pandemic impact, according to Treasury sources.
Ruling coalition parties reached agreement on the key fiscal document that will form the pillar of the upcoming 2021 budget law with measures and spending to boost the economy next year. The plan also takes into account the long term scenario by setting fiscal targets for the next two years.
The updated picture is slightly gloomier than the one outlined in April, during the lockdown crisis, when the government had forecast an 8% GDP contraction and a 155% public debt. The 10.4% deficit projected in April, however, was in line with the current figure.
According to the sources, deficit is projected to fall to 7% in 2021, 4.7% in 2022 and 3% in 2023, when it will finally meet the EU deficit-to-GDP rule.
GDP will also improve over the next two years, rising by 6% in 2021, mainly due to direct European aid from the EUR750 billion pandemic European Recovery Fund of which Rome is expected to be the largest recipient.
The ERF, which will come as a mix of loans and grants, will also help boost investments, according to the sources, and re-launch the virus-hit economy.
Public debt, which has spiked further during the virus crisis, is expected to start slowly declining in 2021-2023, according to sources.