Private investment trends appear more uncertain, but positive surprises are possible. While the machinery sector is likely to continue to suffer due to still-high interest rates and existing manufacturing capacity, developments in the construction sector are less clear. On the other hand, the combination of high interest rates and the defunct super bonus scheme is likely to have a negative impact on the housing sector. On the other hand, non-residential construction investment is expected to benefit from the inflow of recovery and resilience funds from the EU. If the Fourth Tranche expenditures are allocated to new investments sooner than we expect, upside risks to our growth forecasts could materialize.
Although crucial in setting the tone for growth, a national recovery plan does not appear to be on the minds of ministers at the moment. If our projected growth rates continue to disappoint through the first quarter of 2024, things could change quickly. A gap between the government’s ambitious 1.2% assumption for 2024 and actual growth could create fiscal disparities and heighten the sense of crisis. The government’s budget plan aims to stabilize rather than reduce the debt/GDP ratio, leaving little room for fiscal management. Therefore, it may be necessary to prioritize the investment arm of the RRF, and the campaign for the upcoming European elections (scheduled for June 9th) could be an effective platform for promoting his RRF. There is a gender. A clear move in this direction could add upside risks to Italy’s current base-case scenario forecast of GDP growth of 0.4%.