|The slow recovery from recession will continue during 2014 and growth will rise somewhat further in 2015. Gains in confidence will help both consumption and investment, with some additional boost from modest tax cuts which will boost household incomes. Public expenditure will remain weak. Price inflation is set to remain low.
With weak growth and low inflation, the public debt-to-GDP ratio will not begin to fall before 2016. This leaves Italy still vulnerable to potential market turmoil, and thus it is essential to continue fiscal restraint, based on reducing expenditure as a share of GDP. The new government has announced income tax cuts for 2014, financed by spending cuts and small one-off measures. The tax cut will be reversed in 2015 if corresponding spending cuts are not found. Plans for further structural reforms are welcome, and the government should also ensure effective implementation of earlier reforms.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.