Meloni Officials See Italy Defying Gloomy Forecasts to Grow 1%

(Bloomberg) -- Premier Giorgia Meloni’s officials reckon the Italian economy will defy downbeat forecasts this year with expansion of around 1%, according to people familiar with the matter.

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The growth target, being prepared for an update by Meloni and Finance Minister Giancarlo Giorgetti in April, would only slightly undershoot their last outlook, said the people, who declined to be identified because the numbers are confidential.

A result of that magnitude would mark a slight acceleration from last year’s result of 0.9%, and wouldn’t be far from the 1.2% anticipated as part of the budget unveiled on Sept. 27. The current median forecast of economists surveyed by Bloomberg is for a slowdown to 0.6%.

Officials see growth fueled by ongoing momentum from 2023, consumer spending, and faster cash flow from the European Union’s Recovery Fund, the people said.

They added that the effect should carry over into 2025, for which the government is currently targeting growth of about 1.3%, just shy of its prior outlook. Such numbers are provisional and could still change before they’re unveiled in April.

Italian households are slowly recovering purchasing power despite the economy taking a hit from the phasing out of fiscal incentives that had driven growth for the past two years, the people said.

Meanwhile EU money is starting to hit the ground in greater intensity. EU Economy Commissioner Paolo Gentiloni reckoned in November that it could add 0.5 percentage points to growth each year.

The Finance Ministry declined to comment on the growth outlook.

Italy, the euro zone’s third-biggest economy, has been performing relatively well compared to peers, with slower inflation and some growth. Gross domestic product rose 0.2% in the fourth quarter, while Germany’s dropped in what is likely to be a recession.

That country’s continuing weakness risks weighing on Italy, not least as its biggest trading partner. High interest rates and global uncertainty are also overshadowing the outlook.

Even so, relative political stability under Meloni has been a boon. With her fractious coalition reigned in, the economy showing resilience in the past year and the prospect of interest rates falling, investor confidence in the country has risen.

Italy’s 10-year bond yield premium over Germany, a measure of risk in the region, has plunged and the spread between them recently touched the narrowest since 2021. That effect could add 0.2 percentage points to growth this year, according to Bloomberg Economics.

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