“The assessment expressed in the DEF, according to which the economy will need an adequate period of support and revitalization, is acceptable, during which restrictive fiscal policies would be counterproductive “, said the Head of the Economics and Statistics Department of the Bank of Italy Eugenio Gaiotti in a hearing on Def.
“At the same time, as the Document points out, the development of a long-term strategy on which the reduction of the ratio between public debt and GDP also depends,” notes Gaiotti
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“The macroeconomic perspectives presented in the Def are consistent with the” crisis scenario for the Coronavirus emergency with a strong contraction in GDP, industrial activity but “in this phase all the forecasts of the Def and ours are above all scenario analyzes”, according to Eugenio Gaiotti.
“The range of assessments made by observers in the current circumstances is exceptionally wide,” he stresses, pointing out the uncertainties about the duration of the pandemic.
“Any assessment of the performance of public finances is highly dependent on the evolution of the economy. About half of the increase in the weight of debt in the current year is due to the mechanical effect of the fall in the product in the denominator; its decrease expected in 2021 depends on the intensity of the expected recovery of the business “, says the Head of the Economics and Statistics Department of the Bank of Italy. “The relationship between debt and GDP, already very high before the pandemic, will increase following the contraction of the product, the use of automatic stabilizers and the necessary discretionary measures adopted to deal with the consequences of the crisis”.
Upb, stop VAT does not give new spaces but more credible accounts – The decision to eliminate the VAT clauses makes the public finance framework “more transparent and credible”. This was stated by the UPB president Giuseppe Pisauro during the hearing on the Def, stressing that “the deficit and the debt created as a consequence of the deactivation of the clauses do not correspond to a space created for new policies but in fact reflect the dynamics of the policies adopted in the past. ” “Priority choices” will therefore be needed to ensure the gradual reduction of the debt “albeit in an environment of stabilization of the economy”.
In the medium term the Italian economy appears surrounded “by an unprecedented uncertainty” and “predominantly downward-facing risks: health risks” of a “further resurgence of the COVID-19 epidemic; risks of a more marked deterioration in the international context; risks of new financial tensions when fiscal and monetary stimuli will ease”, ‘Upb recalling that the government estimates are based on “the resumption of activity from May and no outbreak of the epidemic: this forecast has a very significant risk”.