Italy's Growth Targets Challenged

ROME (Reuters) – The Italian government's growth targets for 2024 and 2025 are increasingly seen as unattainable, according to assessments from the country's central bank and the budget watchdog UPB.

Overview of Growth Targets

The Treasury established a growth target of 1% for this year and 1.2% for 2025 in its multi-year budget plan released in September.

Economic Performance

Recent preliminary data indicated that the Italian gross domestic product (GDP) stagnated in the third quarter compared to the previous three months. This outcome missed forecasts and raised concerns about growth prospects in the euro zone's third-largest economy.

The Bank of Italy noted that achieving the 1% growth target this year would necessitate a robust GDP report in the fourth quarter, which appears unlikely.

> "Recent data suggests economic activity is struggling to regain momentum by year-end," stated the central bank during parliamentary testimony on Rome's 2025 budget.

Italy’s previous growth rebound post-COVID-19, spurred by government-funded building incentives, seems to be fading.

Economist Paolo Pizzoli indicated that without a significant rebound in the fourth quarter, growth for this year might only reach 0.5%-0.6%, following a rate of 0.7% last year.

Risks to Budget Estimates

The UPB voiced concerns that government estimates are increasingly vulnerable to downside risks. "Next year's target heavily relies on domestic demand, which significantly depends on the execution of Italy's post-COVID recovery plan," UPB stated.

Italy has utilized approximately 45% of the over 100 billion euros ($108.96 billion) received from European Union COVID-19 recovery funds, which falls short of a target set in 2022.

Effective implementation of this recovery plan is viewed as crucial by investors and rating agencies for revitalizing Italy’s lagging economy and managing its strained public finances.

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