The Chairman of the PBO, Giuseppe Pisauro, testified before the Joint Budget Committees of the Senate and the Chamber of deputies as part of the consideration of the budget for 2016-2018.
On the basis of the actual composition of the budget measures, the PBO finds that while the growth forecasts for 2015-2016 are acceptable, those for 2017 and 2018 are imprudent and excessively optimistic. In addition, the macroeconomic outlook is exposed to risks associated with the slowdown in the emerging economies and the deflationary impact of weak oil prices.
The budget measures reinforce the government’s intention to support the economy in 2016 by using the flexibility permitted under European regulations, while at the same time reducing the public debt as a proportion of GDP. The expansionary fiscal policy in 2016, although adopted to cope with what is still a relatively fragile macroeconomic environment, nevertheless presents non-negligible risks thereafter. Commitments of a permanent nature are largely funded in the first year by temporary resources and subsequently by favourable developments in the trend scenario for the public finances, which on the one hand incorporate higher growth rates than the consensus view and, on the other, a substantial contribution from the safeguard clause increasing VAT. The use of safeguard clauses to ensure the achievement of budget goals in the medium term makes it difficult to discern the budget policy objectives for the years after the first: it is not clear if and how a VAT increase in 2017 will be avoided. In order to assess compliance with the European rules, it is necessary to obtain more information on one-off measures. The recourse to the flexibility clause for investment assumes the adoption of a plan that faces considerable implementation risks in view of the issues that have typically characterised the use of European funds. The reduction of the debt/GDP ratio depends on optimistic assumptions of growth in nominal GDP and an ambitious privatisation plan whose details have not been entirely worked out. For a complete assessment, it would also be necessary to know the expected value of outlays connected with derivatives.
The text of the Chairman’s remarks at the hearing contains a brief description of the main measures in the Stability Bill. More extensive analyses concern the abolition of the municipal services tax for primary residences and measures affecting corporate taxation.