Italian Prime Minister Giorgia Meloni may be about to regain some much-needed fiscal space as her coalition seeks extra spending power for its 2024 budget.
(Bloomberg) — Italian Prime Minister Giorgia Meloni may be about to regain some much-needed fiscal space as her coalition seeks extra spending power for its 2024 budget.
Statistics officials have signaled that they will unveil revisions on Friday that could add as much as 2.1% to the size of the economy in 2021, reflecting a rebound from the pandemic that was bigger than originally estimated.
The numerical increase in gross domestic product means the revision could have lowered the 2021 deficit, currently seen at 9% of output, by about 0.2 percentage point.
That’s about €3 billion ($3.2 billion), according to Bloomberg calculations — the same amount Meloni is insisting on reaping from a new tax on bank profits.
Any extra fiscal room would be a boost to Meloni and her coalition, which is trying to keep Italy’s public finances in check while delivering on tax-cut promises to voters. The government is trying to bring its projected deficit down toward the European Union’s 3%-of-GDP limit for next year, when that rule will apply again.
While the revision will support Italy in that respect, it doesn’t put extra money in the government’s coffers to spend on households.
Istat, the country’s statistics agency, is scheduled to hold a press conference on the change and its impact on Friday.
Revisions Across Europe
The new economic data follow similar large upward revisions in the UK and Spain, as Europe’s statistics institutes use more varied data sources to improve their assessment of output during the exceptionally volatile period when Covid-19 shuttered economies before a rebound took hold.
Those pledges were made in easier times before weaker momentum in the economy left the coalition with less money than it had anticipated, and before accounting changes altering the treatment of the so-called superbonus home renovation program raised the prospect of markedly worse deficit numbers.
If Italy’s government does end up with some capacity to spend more, that outcome would mainly reflect the growth performance during the premiership of Meloni’s successor, Mario Draghi.
He took power in February 2021 at the helm of a technocratic government that then began to target European Union funds intended to revamp the euro-zone’s third-biggest economy.
Meloni’s government wouldn’t be the first to benefit from enhanced public finances caused by such data revisions. Back in 2014, a change in methodology requiring the inclusion of prostitution and sales of illegal drugs in GDP calculations was also seen to aid then-premier Matteo Renzi’s effort to meet deficit targets.
Italy’s government is set to present new budget and economic forecasts at the end of the month.
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