Italy to Revise GDP Growth Forecast for 2024 Downward Amidst Negative Outlook and Rising Interest Rates

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Italy is planning to revise its economic growth forecast for 2024 downward but maintain its deficit targets, according to government officials. The country's Economic and Financial Document, to be unveiled on Tuesday, will reportedly show a boost in GDP growth for 2023, but a decrease in the following year's projection. The government will confirm its public finance targets to keep the budget deficit on a downward trend, with plans to maintain its 2023 budget deficit target at 4.5% of national output.

However, Italy is currently behind on targets and milestones agreed with Brussels regarding the European Union's post-COVID recovery funding programme. The country is due to receive around €200bn ($217.92bn) in grants and cheap loans through 2026. The officials said that the negative impact of rising interest rates, imposed by the European Central Bank to curb inflation, is worsening the outlook for 2024.

Economy Minister Giancarlo Giorgetti has criticised the ECB's policy, stating that higher interest rates could pose a threat to growth. Italy's public debt, which is proportionally the highest in the euro zone after Greece, is expected to decline gradually over the years, from 144.4% of GDP in 2022 to 140.9% in 2025. Rome is also gradually phasing out its strongly expansionary policy adopted since 2020 to mitigate the impact of the pandemic and an energy crisis, which was exacerbated by the Russian invasion of Ukraine.

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