Trend macroeconomic scenario in the Update to the 2019 EFD endorsed

The endorsement letter for the trend macroeconomic scenario in the Update to the 2019 Economic and Financial Document (the Update), transmitted by the Ministry for the Economy and Finance (MEF) on 23 September last, was published today on the website of the Parliamentary Budget Office (PBO). The PBO had issued its comments on a preliminary version of the trend forecasts provided by the MEF, to which the MEF responded on 19 September. As required, the PBO will also assess the policy macroeconomic scenario published in the Update, which incorporates the effects of the upcoming budget measures.


The PBO Board endorsed the trend forecast for 2019-2020 contained in the Update, which projects real growth of 0.1 per cent and 0.4 per cent respectively. The forecast, which reflects the increases in indirect taxes connected with the safeguard clauses as from next year, appears to fall within an acceptable forecasting range, despite the presence of significant risks to real GDP growth. The overall acceptability of the trend projections in the Update takes account of: a) the small size of the overshoots compared with the PBO panel forecasts, also considering the uncertainty of the current short-term outlook; and b) the fact that the Update’s projection for nominal GDP growth – a variable of direct importance for the public finances – is in line with the upper bound of the PBO panel forecasts. However, the trend scenario of the Update is exposed to what are mainly downside risks attribuable various sources of uncertainty in both the short and medium term.


For the 2021-2022 period, which is not subject to endorsement by the PBO, the trend forecast for real GDP growth (0.8 per cent and 1.0 per cent respectively) seems slightly optimistic, falling just above the upper bound of the PBO panel forecasts in both years. In addition, Italy’s projected GDP growth rate at the end of the forecast horizon of the Update (1.0 per cent) is higher than the estimates of potential growth produced by the main institutions, including those formulated by the MEF in the 2019 EFD.


The medium-term macroeconomic outlook for the Italian economy is exposed to considerable risks, mainly on the downside, that are largely of an international (developments in the US-China global trade war Brexit, geopolitical risks) and financial nature. The risks are all more or less directly attributable to the uncertainty surrounding economic policy, which is currently close to historical highs.