“A stronger-than-expected second quarter explains the upward revision from the 4.5 per cent expansion forecast for 2021 in the OECD’s May Economic Outlook,” the survey said…reports Asian Lite News.
The Italian economy will grow by 5.9 per cent in 2021, and return to the levels registered in 2019 by the first half of next year, said the Organization for Economic Cooperation and Development (OECD).
In its latest Economic Survey of the country unveiled on Monday, the Organization said: “Italy’s economy is recovering steadily from the Covid crisis, thanks to the vaccination campaign and generous fiscal support to households and firms.”
After the 5.9 per cent growth projected for this year, the country’s gross domestic product (GDP) is expected to expand by 4.1 per cent in 2022, following the steep 8.9 per cent fall registered in 2020, reports Xinhua news agency.
“A stronger-than-expected second quarter explains the upward revision from the 4.5 per cent expansion forecast for 2021 in the OECD’s May Economic Outlook,” the survey said.
Addressing the presentation press conference alongside OECD Secretary-General Mathias Cormann, Italy’s Economy and Finance Minister Daniele Franco said the government was “aiming at a post-Covid growth higher than that (registered) before the pandemic-related crisis”.
“We must overcome the long stagnation, this is our main goal,” Franco said.
He said the country’s official economic forecasts and estimates of public finance targets will now be reviewed and presented in the update to the Economic and Financial Document (DEF) usually unveiled in late September.
In April, the Economy and Finance Ministry had predicted Italy’s GDP would grow by 4.5 per cent in 2021, in line with the previous OECD forecast, 4.8 per cent in 2022, and 2.6 per cent in 2023.
While presenting the report, the OECD chief noted the National Recovery and Resilience Plan provided by the Italian government would activate “stronger, greener, fairer and more digitalized growth that will benefit all Italians, with improved opportunities to get ahead”.
Presented earlier this year and passed by the European Union (EU) authorities, Italy’s National Recovery and Resilience Plan is worth 222.1 billion euros ($263 billion) overall, mostly financed through the Next Generation EU program launched in 2020 to help member states restart their economies after the Covid-19 crisis.
In the survey, the OECD said Italy’s “generous” supportive policies during the coronavirus crisis “mitigated job losses and hardship and preserved productive capacity,” and loan guarantees and moratoria on debt repayments supported firm liquidity and limited bankruptcies.
“Significant fiscal support in 2021 will buoy the near-term recovery, as vaccination rates accelerate and restrictions ease,” it predicted.
“Higher public investment, including from Next Generation EU funds, will support private sector investment, alongside higher confidence and demand… Consumption is expected to rise as households are able to consume part of their savings and employment recovers.”
Yet, the Organization recommended the country not to halt its supportive fiscal policy towards households and firms “until the recovery is firmly underway”.
“Withdrawing liquidity support too early could force otherwise viable firms into bankruptcy,” it warned.
“It would also raise unemployment and poverty, which were already high before Covid, affecting youth and women particularly.”
Once the pandemic subsides, the OECD recommended Italy to reform public spending and tax policy, among other sectors.
“Ageing-related expenses crowd out investment in infrastructure, education, and training,” penalising the young, many of whom are out of work and at risk of poverty, it said.
As for the tax policy, Italy was encouraged to reduce the complexity of the system and to lower labour taxes.
Among other recommendations, the OECD suggested Italy raise investment and productivity by cutting the stock of regulations, minimising regulatory barriers to enter professional services, and providing a long-term plan on carbon prices and supportive policies to reduce the costs of energy transition.
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