April 1, 2019 / 3:35 PM / 6 months ago

UPDATE 1-Italy's Tria sees 2019 deficit below 2.5 pct of GDP

(Adds Tria comments, background)

By Giuseppe Fonte

ROME, April 1 (Reuters) - Italian Economy Minister Giovanni Tria said on Monday the government will set a new 2019 budget deficit target below the 2.5 percent of gross domestic product predicted by the Organisation for Economic Cooperation and Development.

Italy is due to issue new economic and public finance forecasts by April 10, in a document which will set the initial framework for its 2020 budget.

“I think the nominal deficit will be below the OECD’s forecast,” Tria told reporters at a news conference with the chief of the Paris-based think-tank, Angel Gurria.

Tria said that in the face of an acute growth slowdown, the government will not tighten policy to keep this year’s deficit inside a 2.04 percent target agreed with Brussels in December, but would in any case keep control of public finances.

“We will try to improve the structural deficit,” which is adjusted for GDP growth fluctuations, compared with the commitments made with the European Commission, Tria said.

Italy has pledged to hold this year’s structural deficit steady at 1.4 percent of GDP.

The OECD forecast Italy’s economy would contract by 0.2 percent this year, but Tria said the government is set to adopt a stimulus package to ensure growth remains above zero.

“We can only get out of our problems by improving GDP growth,” he said, adding that the plan would include simplifying the tender process for public contracts and incentives for venture capital.

Under an unchanged policy scenario, the Treasury estimates that this year’s growth would be 0.1 percent, rising to 0.6 percent in 2020, government sources have told Reuters.

It remains to be seen how much this can be raised by the “growth decree” which the cabinet aims to approve this week.

Italy is committed to lowering the public debt, partly through privatisations and the sale of state-owned real estate, Tria said, but he noted that the task was made harder by the economic slowdown and sluggish inflation.

Italy’s debt, which stood at 132.1 percent of GDP last year, is proportionally the highest in the euro zone after Greece’s.

This year’s planned asset sales, which were targeted in the 2019 budget to raise some 18 billion euros ($20.20 billion), or 1 percent of GDP, have not yet got off the ground. ($1 = 0.8913 euros) (additional reporting by Gavin Jones, writing by Gavin Jones)

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