By Giuseppe Fonte
ROME (Reuters) – Italy plans to set aside at least 15 billion euros ($14.6 billion) in its 2023 budget to soften the impact of sky-high energy costs on firms and families, two government sources told Reuters on Thursday.
Prime Minister Giorgia Meloni’s right-wing government will raise next year’s budget deficit to 4.5% of gross domestic product (GDP), from the 3.4% projected in September by the previous administration of Mario Draghi. This would free up budget room for expansionary measures worth some 21 billion euros.
The resources available to support the economy will increase if current trends lead to a lower deficit next year than the 3.4% of GDP predicted two months ago, the sources said.
Rome also aims to collect additional funds by cutting part of almost 9 billion euros earmarked in 2023 for a “citizens’ wage” poverty relief scheme.
Public finances this year have been stronger than forecast, with value-added tax revenues and excise duties boosted by high inflation and surging energy prices. Inflation has also helped cut Italy’s huge public debt.
Italy’s EU-harmonised inflation rate hit 12.8% in October, the highest reading since the series was introduced in 1996.
All this has given Meloni, who took office last month, valuable fiscal leeway to expand the economy while still keeping the deficit-to-GDP ratio on a downward trajectory over coming years.
At the same time the European Union’s fiscal rules are still suspended to help the bloc’s economies recover from the COVID-19 pandemic.
Nevertheless, Meloni has already said she would push back some of the coalition’s more ambitious campaign promises of higher pensions and swingeing tax cuts, devoting most of the available funds to tackling the energy crisis.
The new estimates are due to be officially released on Friday in the Treasury’s annual Economic and Financial Document (DEF). They will form the preliminary framework for the 2023 budget law, which must be drawn up and approved by the end of this year.
The DEF will confirm an economic growth forecast of 0.6% in 2023, the sources said.
($1 = 1.0259 euros)
(Reporting by Giuseppe Fonte; Editing by Susan Fenton)