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16.9.2021 7 INTERNATIONAL NEWS ITALY'S Treasury expects the econo- my to grow by around 6% this year and by more than 4% in 2022, two sourc- es close to the matter told Reuters on Wednesday, taking gross domestic product back above its pre-pandemic level by the end of next year. The 2021 forecast is a steep upward revision from a 4.5% estimate that was pencilled in by Prime Minister Mario Draghi's government in April, reflect- ing a recent spate of stronger-than-ex- pected economic indicators. The new growth forecasts, along with public finance targets, will be published by Sept. 27 in the Treas- ury's annual Economic and Financial Document (DEF). This will form the preliminary framework for the 2022 budget. Last year the COVID-hit economy contracted by 8.9%, the steepest re- cession in Italy's post-war history. The firm pick-up now in place will ensure lower than expected public deficit and debt ratios this year, Econ- omy Minister Daniele Franco said ear- lier this month. The Treasury now estimates 4.2% growth in 2022, below the 4.8% target set in April, as the recovery from last year's steep recession is seen flatten- ing out after arriving more quickly than anticipated this year. The forecasts are subject to ongoing government discussions and could still change before their publication, the sources said, asking not to be named because of the sensitivity of the matter. Moreover, they are based on an un- changed policy scenario and next year's projection does not include the impact of new expansionary meas- ures which the government intends to present next month in its 2022 budget. The final growth target for next year will therefore be more ambitious, the sources said. One of them said it could end up close to the 4.8% rate estimat- ed in April. Italy has consistently underper- formed its European partners over the past two decades. The last time it reg- istered growth of more than 6% was in 1976, when it surged by 6.6%. Franco said the government planned to maintain expansionary policies to recoup the growth lost due to COV- ID-19 as quickly as possible. THE Irish government's plans to re- duce its budget deficit more gradually than planned to fund spending increas- es is "at the limit of what is prudent", the country's fiscal watchdog said on Wednesday. Ministers in June scrapped plans to close the budget deficit opened up by one of Europe's strictest COVID-19 lockdown regimes by 2025 primarily to increase capital spending in areas such as housing, where there is a severe un- dersupply of new homes. However the Irish Fiscal Advisory Council (IFAC) said running significant budget deficits for several years during a period of strong economic growth car- ried risks for an economy with one of the highest public debt ratios in Europe. It also warned that even allowing for low interest rates into the future, there was a one-in-four risk that the govern- ment's debt ratio could end up on an unsustainable path. Ireland's public debt ratio rose to 104.8% of modified gross national in- come (GNI*) at end-2020 from 94.7% in 2019. e finance ministry forecasts it will stand at 106.3% in 2025 rather than beginning to fall back to pre-pandemic levels. IFAC urged the government to choose between significantly expanding capital investment, fast increases in current spending and a desire to simultaneous- ly cut taxes, rather than implement all three as is currently planned for next month's budget. "In terms of permanent measures, budget 2022 plans look to be at the limit of what is prudent," the watchdog said in its pre-budget submission. "Borrowing to finance investment af- ter the recovery could also lead to infla- tion and, eventually, overheating. Most notably, supply constraints in construc- tion may lead to rising prices." Ireland's finance ministry forecasts that the budget deficit will fall to 1.5% of gross domestic product by 2025 or 2.8% of GNI*, viewed by government as a more accurate measure of the size of the economy as it strips out how large multinationals can distort Irish GDP. While the fiscal council said that bet- ter than expected tax receipts indicat- ed that a deficit of closer to 7% of GNI* might be possible this year, the state would still be running a deficit of 1.3% of GNI* by 2025. Italy forecasts 6% GDP growth this year, above 4% in 2022 Irish budget plans 'at the limit of what is prudent' - watchdog

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