Italy Revises Down Growth Forecast

Italian Economy Minister Giovanni Tria told parliament Wednesday that the government has downgraded growth forecast for both this year and next.

Growth this year is projected to be 1.2% down from prior forecast of 1.5%. 2019 GDP growth is projected to be 1-1.1%, down from prior forecast of 1.4%, Actionforex reported.

Tria added that the slowdown would bring deficit to 1.2% in 2019, higher than the deficit target of 0.8% of GDP, drawn up by prior administration.

A clearer estimate of the deficit will be available later in September. The figures will depend on the cost of servicing the debts and spending cuts.

While the plan appears to be at odds with EU rules, Tria emphasized that it’s still “compatible” with Italy’s commitment to EU on its public finances.

Tria said that Italy planned to sell its holding in the state-controlled bank Monte dei Paschi di Siena—remarks that appeared to show a split within the ruling coalition composed of the 5-Star Movement and far-right League.

The worsening economic forecasts could put the new anti-establishment government on a collision course with the European Commission, which monitors the budgets of EU countries.

“We are discussing with the commission so as to avoid a pro-cyclical fiscal correction which would intensify the slowdown in the economy,” he said.

But Tria, an academic who is seen as more moderate than many of his government partners, said lower growth could slow the reduction of Italy’s debt, the second highest in the EU after bailed-out Greece, but the government maintained the target of bringing it down.