Here is the frightening part of the Italian budget: growth figures. In an interview Giovanni Tria said that growth forecasts for 2019 and 2020 were 1.6% and 1.7% respectively.
These are unbelievable expectations. Such numbers were attained only in period of global euphoria (2006) or of global recovery (2010). This will not be the case in 2019 or 2020. The Italian GDP growth trend is just 1.1%. That’s why budget numbers are at risks.
We cannot bet on a 2.4% budget deficit in 2019, 2020 and 2021. We must have lower growth figures in mind and probably higher expenditures. The situation is at risk in Italy In other words, the reduction of the public debt (reduction of the public debt to GDP ratio by 1% every year ) will not be achieved.
Philippe Waechter - Chief Economist - Ostrum Asset Management