MNI: Superbonus Impact On Italy's '24 Budget Deficit "Limited"

The impact on Italy’s budget deficit from the Superbonus tax credits for home renovations should be “much more limited” in 2024 than in 2023, when the programme was largely responsible for the country missing its fiscal targets by almost 2% of GDP, sources close to the matter told MNI.

The government’s expectations for the cost of Superbonus will be incorporated into new macroeconomic projections in April, and should reflect a tightening of eligibility criteria for the programme, though the final extent of its effect on the budget will depend on whether Eurostat rules that Italy has been correct in accounting for it as a non-payable tax credit, the sources said.

Eurostat’s ruling, which one of the sources said should come in June, could potentially complicate Italy’s budget prospects in the coming years, making it more difficult for the country to comply with the European Union’s new fiscal rules, if the decision is to insist that the programme be considered payable.

APRIL PROJECTIONS

Superbonus credits helped push Italy’s deficit to 7.2% of GDP last year, versus the government’s projection of 5.3%. A rush of applications to the programme at the end of 2023 before its eligibility criteria were tightened will feed into 2024’s accounting, the sources said, though they insisted that the effect on the overall deficit will still be “limited.”

In its April projections, the government is set to revise downwards its 2024 growth forecast from 1.2%, after 0.9% growth in 2023, which was 0.1 percentage point better than officials expected. (See MNI: Italy Set To Downgrade 2024 GDP Forecast In April-Sources)

The Italian government calculates that private consumption and an acceleration of spending under the NextGenerationEU programme will help to support the economy although it is not ruled out some spending cuts later in the year.