Italy raises public deficit forecast for 2023

Milan: Italian far-right Prime Minister Giorgia Meloni has raised next year’s public deficit forecast in order to finance measures to help households and businesses confront soaring energy prices.

Like other countries in Europe, Italians will face a tough winter with energy bills increasing alongside higher interest rates and inflation.

Meloni, who came to power last month, pledged during the election campaign to control expenditure in a country long plagued by low growth and huge debt.

On Friday, after a cabinet meeting, the government agreed to increase the public deficit to 4.5 percent of GDP.

It is above the 3.4 percent forecast by her predecessor Mario Draghi in September, but in line with what Italian media had reported she would do.

“This allows us to free up an additional 22 to 23 billion euros ($22-23 billion) that we intend to devote to the fight against rising energy prices,” Meloni told reporters late Friday.

The deficit is forecast to fall to 3.7 percent in 2024 and three percent in 2025, according to an economics roadmap adopted by Rome.

Meloni’s government also raised the forecast for economic growth this year to 3.7 percent, up from Draghi’s prediction of 3.3 percent.

It comes after Italy posted better-than-expected quarterly growth on Monday. “Thanks to a favourable third quarter”, the government was able to free up “around 9.5 billion euros” that the government will allocate “from next week” towards measures to mitigate higher energy costs, Meloni said.

Economy Minister Giancarlo Giorgetti, who served under Draghi as economic development minister, kept the previous premier’s forecast of 0.6 percent growth in 2023.

“We are ready to confront the risks of recession that are mentioned more and more, at the global and European level, and which could also affect the Italian economy,” Giorgetti said.

But the International Monetary Fund believes Italy will not be able to avoid a recession next year, warning GDP will shrink by 0.2 percent in 2023.

Meloni held talks this week with European Union chiefs in Brussels, where she struck a conciliatory tone.

The meetings were also an opportunity to discuss rising energy costs and the draft 2023 budget that the new Italian government must complete and send to Brussels before the end of the month.