Italian Prime Minister Giorgia Meloni has announced a slightly more ambitious fiscal outlook for this year in an effort to stimulate economic growth through tax cuts. Under the new budget plan, which was revealed on Tuesday, the eurozone's third-largest economy is expected to expand by 1% in 2023, which is 0.1 percentage point higher than it would have been without the additional measure. This will result in a deficit of 4.5% of gross domestic product, as opposed to the 4.35% that would have been achieved under current legislation. The extra fiscal space will be used to fund over €3 billion in tax cuts for low-income families, as well as to reduce the overall tax burden.
Finance Minister Giancarlo Giorgetti praised the budget plan for its responsible ambition and realistic goals for achieving greater GDP growth in the years to come. However, the plan also demonstrates the difficult trade-offs that Meloni's three-party governing coalition must make to balance the need to contain the country's massive debt while also supporting the economy. The improved growth outlook for this year will be offset by a less optimistic projection for 2024, which is targeted at 1.5% expansion, down from the previous estimate of 1.9%.
The government's economic prospects are also clouded by likely delays next year in Italy's European Union Recovery Fund projects. Talks are currently underway with European institutions to revise some of the projects, milestones, and targets, according to the Finance Ministry's statement.