MNI: Italy Set To Downgrade 2024 GDP Forecast In April-Sources

The Italian government is likely revise down its 2024 economic growth projection from 1.2% to below 1% when it updates its macroeconomic framework and spending plans in April, two sources close to the government told MNI.

While it is still too early in the year to be certain, all incoming data points down, one of the sources said. “We are objectively at risk,” said the other, noting that the 1.2% projection was from early autumn, before the Hamas-Israel conflict and a weaker-than-expected performance by the German economy.

Several international institutions have projected an Italian slowdown in 2024, including the Organisation for Economic Cooperation and Development, which forecast 0.7% growth for the country on Monday.

The slowdown in Germany is having a significant impact on Italy, especially in the industrial north, sources said. While attacks by Houthi rebels on Red Sea shipping have been selective, allowing Chinese vessels to pass unmolested, they are affecting Italian exports and the potential exists for disruption to intensify, though they are more likely to affect producer price inflation than growth, the sources said.

GOVERNMENT SPENDING

Still, the likely downward revision to growth should not significantly affect Rome’s spending plans, posing little threat so far to policies announced in December’s budget law, the sources said.

“It is still very early, but with all these elements in hand I would tell you that no,” said one of the sources, adding that the recent drop in Italian bond yields could also help Italy’s fiscal situation.

In a press conference in early January, Prime Minister Giorgia Meloni said she would rather reduce spending than increase the fiscal deficit in 2024, citing higher financing costs. Lower Italian yields come as Germany’s economy slows and as investors anticipate European Central Bank easing. (See MNI SOURCES: "Biggest Minority" Favours ECB June Cut)