Italy expects to cut budget deficit to 2.8pc of GDP in 2026

Milan: Italy is aiming to slash its budget deficit to 2.8 per cent of GDP in 2026, below the 3 per cent limit set by the European Union, the finance ministry said on Friday.

Thanks to larger-than-expected tax receipts, Rome is expecting a public sector deficit of 3.8 per cent of economic output this year, down from 7.2 per cent in 2023, and below the 4.3-per cent forecast the government made in April.

The pledges of Prime Minister Giorgia Meloni’s government were laid out in a seven-year plan to narrow the deficit that was presented to the cabinet by Economy Minister Giancarlo Giorgetti, before being sent on to the European Commission.

The Commission has already cited Italy and six other EU members for having excessive deficits.“The plan adopts a serious, prudent and responsible approach, and is in line with actions the government has taken from the start,” the ministry said in its statement.

“The government aims to reduce the deficit/GDP ratio to 3.3 per cent in 2025 and 2.8 per cent in 2026, which allows us to exit the procedure for excess deficit,” it said.The plan foresees annual public spending rising by close to 1.5 per cent over the period.

After a review by the national statistics institute and the Bank of Italy, the country’s 2023 public debt is now estimated at 134.8 per cent of GDP, down from 137.3 per cent previously, the ministry said.

This rate remains the highest in the European Union behind that of Greece.The ratio will start to come down from 2027, the ministry said, without providing figures. Following the Covid pandemic, Italy’s deficit and debt were further boosted by a system of home improvement subsidies launched by then prime minister Giuseppe Conte in 2020.