Italy Agency Forecasts Deficit Reduction Trajectory

The Italian government's estimates project a reduction in the deficit-to-GDP ratio. Interest expenditure is expected to remain stable at 3.9% of GDP. Revenue growth was primarily driven by social security contributions, which rose by just over 1 percent of GDP from 3.4 percent in 2024. Following 2026, the debt ratio is expected to reduce to below the 3% threshold. The data indicates a continuing process of public finance consolidation. This stability is attributed to the consolidation process and improved sovereign creditworthiness. The interest-to-GDP ratio is currently 4.1% and is expected to trend toward 4.5% in the coming year. Specifically, contributions to investments are decreasing as the forecast horizon for PNR investment contributions expires. Cash effects related to the accounting of tax credits and incentives will continue to weigh on the debt profile through 2026 and 2027. A more pronounced decline in debt is expected from 2028 onwards following a slight reduction in 2027. Debt costs are reported as stable and public investments are noted. The report mentions a possible exit from the EU's excessive deficit procedure by 2027.