The Chairman of the Parliamentary Budget Office (PBO), Giuseppe Pisauro, testified (in Italian) today at a joint session of the Budget Committees of the Senate and Chamber of Deputies as part of the preliminary consideration of the 2017 Economic and Financial Document (EFD) published on 12 April by the Ministry for the Economy and Finance (MEF).
In his remarks, Pisauro analysed the content of the EFD, explaining the reasons, in the light of available information, for the PBO’s endorsement of the 2017-2020 policy scenario (after having previously endorsed the trend macroeconomic scenario) despite the presence of risk factors linked to the international environment (the emergence of US protectionist positions, intensification of geopolitical tensions, the dissipation of the decline in the euro, which favours Italian exports) and the high degree of uncertainty currently affecting the definition of the fiscal policy set out in the EFD. The growth of real GDP lies within the range of forecasts produced by the PBO panel (Cer, Prometeia and Ref, in addition to the PBO itself), albeit at the upper bound of the interval, especially in 2018-2019. The policy scenario reflects faster growth in final consumption than projected by the PBO panel, particularly in 2018 and 2019, the year in which the contribution of domestic demand to GDP growth is strongest.
With regard to the public finances, Pisauro noted:
- the policy scenario for fiscal policy is largely undefined. Taking for granted the measures to be implemented with a decree in April (0.2 points of GDP in 2017 and 0.3 points subsequently) and assuming the suspension of the safeguard clauses announced in the EFD, net corrective measures of 0.9 points of GDP would be necessary in 2018 and 1.4 points in each of the following two years. There is virtually no information on the substance of these interventions: the EFD only refers “expenditure and revenue measures inclusive of additional provisions to counter tax evasion”. What is more: the magnitude of the gross measures to obtain the necessary resources should be greater as ‑ the EFD says – “the Government also intends to find room for expansionary measures and measures to reduce the tax burden in line with actions taken in previous years”. Again, there is no indication of the characteristics and scale of these expansionary measures.
- In this scenario, it appears difficult to meet the commitment to fully suspend the safeguard clauses. In reality, the entire scenario reflects an underlying uncertainty about the very size of the adjustment that will be needed, with much hope being placed in the possibility, at the European level, of “more growth-oriented changes in the SGP’s preventive arm” that would “reduce the fiscal corrections requested of Italy in the coming years”.
- In the policy scenario set out in the EFD, the structural balance over 2018-2020 appears to be fully compliant with EU and national rules. The debt/GDP ratio is expected to decline, although still not sufficiently to ensure compliance with the numerical rule within the policy horizon.
- The inclusion for the first time of a number of welfare indicators (fair and sustainable well-being) in the EFD is a welcome development because it expands the information available for assessing public decision-making. For the future, the permanent incorporation of this initial experiment will require an expansion of the set of indicators to be considered and the refinement of the methodological aspects of their specification.
- The National Reform Program for 2017 provides a comprehensive description of the progress made in 2016 and the early months of this year, confirming the reform programs outlined in previous planning documents.