By Giuseppe Fonte
ROME (Reuters) – Italy’s government may cut its economic growth forecast for next year, people familiar with the matter said, as it weighs the negative impact of rising interest rates and difficulties in spending European Union post-COVID recovery funds.
The Treasury last November targeted a growth rate for the euro zone’s third-largest economy of 0.6% this year and 1.9% in 2024.
While the 2023 projection is set to be raised to 0.9%, the outlook for next year has clouded, two sources said, asking not to be named due to the sensitivity of the matter.
The new 2024 estimate will probably be lower than 1.8%, one of the sources said.
A Treasury spokesperson said the updated forecasts were still being worked on.
Economy Minister Giancarlo Giorgetti said last week that the outlook for the Italian economy was improving but, in an implicit criticism of European Central Bank policy, added that higher interest rates designed to curb inflation could pose a threat to growth.
Another factor affecting the 2024 outlook is Italy’s ability to catch up with the EU’s post-COVID investment programme.
Italy is due to receive roughly 200 billion euros ($218 billion) in EU grants and cheap loans through 2026, making it the scheme’s largest beneficiary in absolute terms.
However, the government is falling behind both on targets and milestones agreed with Brussels in return for the aid, and on spending money already received.
The new growth forecasts, along with updated public finance targets, are expected to be published by mid-April.
The estimates being drawn up are made under an unchanged policy scenario and so do not include the positive impact of measures the government also intends to announce to support families and firms.
Final growth targets usually are more ambitious than forecasts reflecting the current economic outlook.
(Editing by Gavin Jones, Hugh Lawson; editing by John Stonestreet)
