Joint Session of the Fifth Committees
of the Chamber of Deputies (Budget, Treasury and Planning)
and of the Senate of the Republic (Economic Planning and Budget)
Preliminary hearing
on the Update to the
2018 Economic and Financial Document
Testimony of the Deputy Governor of the Bank of Italy
Luigi Federico Signorini

Mr President, Honourable Members of Parliament,
I wish to thank the Fifth Committees of the Chamber of Deputies and of the
Italian Senate for once again giving the Bank of Italy this opportunity to provide its
technical assessment as part of the consultations on the Update to the Economic and
Financial Document.
1 The macroeconomic outlook
Following the severe crisis of 2008-13, the Italian economy has been recovering
for the past five years. Last year GDP growth came to 1.6 per cent, with contributions
from all the components of demand, domestic and foreign. In 2018, notwithstanding
the overall solidity of domestic demand, the pace of growth gradually moderated,
affected above all by the slowdown in world trade. Sales outside the EU nonetheless
turned upwards again in August. Fears of a further spike in trade tensions appear to
have dented the confidence of firms at international level and risk affecting economic
activity even beyond the direct impact on trade of the protectionist measures
implemented to date. The situation remains uncertain; the Italian economy is very
open to foreign trade and is therefore exposed to the related risks.
According to the latest data released by Istat, industrial production fell sharply
in July. In recent times the statistical variability of the index has intensified and it is
therefore important not to overestimate the meaning of any one reading. Based on our
estimates, which draw on updated data on energy consumption and goods flows, in
August and September there appears to have been a recovery. It is nonetheless still
likely that production in the third quarter will stagnate overall. What happens in the
fourth quarter, which has just begun, will mark the point of departure for the level of
industrial production growth achieved in 2019. The index based on the assessments of
purchasing managers in industrial sector firms also fell during the summer months. The
latest cyclical indications are instead more favourable in the service sector. According
to our quarterly survey conducted in September, firms continue to expect investment
to increase in 2018, albeit to a lesser extent than was expected six months ago.
Labour market data continue to be positive. The number of persons in
employment in August was up by 300,000 compared with the end of last year,
reflecting above all the increase in fixed-term contracts. The employment-intensive
nature of the recovery has therefore been confirmed.
In recent weeks, signs of tension in the financial markets have intensified.
The yields on Italian government securities have turned upwards again. Funding
conditions and banks' market valuations have been affected as a result: in early
October there was a steep drop in bank share prices and the CDS spreads of the
leading credit institutions were up sharply on the first half of the year.
Yet still today the central projection remains that of - albeit rather slower -
economic growth in the short term. In July's Economic Bulletin we had forecast
an increase in GDP of 1.3 per cent this year and of 1 per cent in 2019, assuming
the full deactivation of the safeguard clauses on indirect taxation. The latest data
suggest that, provided economic policy assumptions remain unchanged, growth
will be slightly lower both this year and the next.
The risks, especially those connected with the performance of world trade
and the conditions on Italy's financial markets, have intensified. The accentuation
of the protectionist stances of trade policies, enduring tensions in various parts of
the world, and the knock-on effects on business confidence, could dampen world
economic activity next year, slowing the impetus provided so far to our economy
by the international context. On the home front, protracted tensions on the financial
markets would have detrimental effects on the funding conditions of households
and firms and on domestic demand.
The Government's current legislation macroeconomic scenario, which does
not incorporate the deactivation of the safeguard clauses on indirect taxation,
envisages 1.2 per cent GDP growth this year and 0.9 per cent the next. This figure
is within the interval of the estimates currently available, even if it is based on
assumptions about exogenous variables that are relatively favourable compared
with the latest trends. In the two years 2020-21 GDP is expected to expand by 1.1
per cent.
The policy scenario raises GDP growth forecasts to 1.5 per cent next year,
1.6 per cent in 2020 and 1.4 per cent in 2021, thanks to the effect of the budgetary
provisions.
These measures are expected to have a significant impact; the Government's
estimate assumes that the values of the multipliers of the expansionary measures
will be higher than those generally estimated for Italy and that the measures set
out in the Update will stimulate economic activity already in the early months
of next year. A more comprehensive assessment would require details that are
not yet available on the composition, design and implementation of the measures,
including their funding.
While for 2019 the VAT increases envisaged under the safeguard clauses have
been eliminated, for 2020 and 2021 the planning scenario continues to incorporate
them, at least in part; it therefore results in a future increase in indirect taxation,
but how this would be designed and its entity are not indicated in the Update. The
Government did, however, already announce that it does not intend to actually
implement the increase, and that it will replace it with other measures to cut
spending and improve tax revenue collection (these measures are also not specified
further at present).
In addition to the direct effect of the budgetary measures on economic activity,
the impact on the confidence of savers and the market must also be taken into
consideration. I will return to this point in the concluding section of my address.
2 The public accounts in 2018
The Update to the Economic and Financial Document (DEF) revises the
estimate for net borrowing, bringing it to 1.8 per cent of GDP, from 1.6 per cent
indicated in April's DEF. The revision stems from a reduction of €3.9 billion in
revenue, partly connected to lower expected GDP growth, and to an increase of
€1.9 billion in interest payments.
In September Istat released new national accounts estimates for the last three years.
Net borrowing for 2017 was revised upwards, from 2.3 to 2.4 per cent of GDP.
Compared with 2017, it is estimated that net borrowing will decrease by over
half a percentage point of GDP, owing to an increase in the primary surplus (0.4
percentage points) and a reduction in interest payments (0.2 points). The tax burden
will decline from 42.2 per cent in 2017 to 41.9 per cent this year, mainly due to
developments in direct taxes.
The data observed so far on the borrowing requirement and government
receipts appear consistent with a reduction in net borrowing in the current year.
Excluding the estimated effects of the main operations that do not impact net
borrowing and a number of temporal asymmetries, the general government borrowing
requirement in the first nine months of 2018 (estimated by approximating the still
unavailable data for August and September with those for the state sector borrowing
requirement) decreased compared with the corresponding period of 2017. In the same
period, tax revenue entered in the State budget, net of lottery and gaming receipts,
increased by 0.5 per cent compared with the same period of 2017, above all thanks
to the positive performance of VAT and personal income tax (Irpef) revenue. If the
data are adjusted to take account of some asymmetries of a purely accounting nature,
the estimated increase in revenue would be greater, and basically consistent with the
growth forecasts of general government tax revenue indicated in the Update.
In the policy scenario, the structural deficit (that is, cyclically-adjusted and
net of temporary measures) is expected to reach 0.9 per cent of GDP.
The expected reduction in the structural deficit is less than that for the overall
deficit (0.2 percentage points versus 0.5 points); the difference is mainly due to the
reduction in the output gap, as the net effects of the temporary measures are extremely
limited in both 2017 and 2018.
According to the Update, in 2018 the debt-to-GDP ratio will fall slightly,
from 131.2 per cent at end-2017 to 130.9 per cent. The reduction is almost 1
percentage point less than that estimated in April, owing to higher net borrowing
expectations and, especially, slower nominal GDP growth.
As part of its September revision of the national accounts data, Istat adjusted
upwards its nominal GDP estimate for the two years 2016-17. Owing to these changes,
in both years the debt-to-GDP ratio decreased by about 0.6 percentage points.
3 Public finance projections for 2019-2021
Current legislation scenario. - The Update revises the net borrowing
forecasts for the three years 2019-2021 in the current legislation scenario,
raising them (compared with April's DEF) by 0.4 percentage points for next
year and by 0.7 points for each of the two years 2020-21. The revision takes
account of a worsening GDP growth outlook and of higher interest payments
(more than 0.1 percentage points in 2019, 0.2 points in 2020 and 0.3 points
in 2021).
Notwithstanding this revision, current legislation net borrowing is expected to
continue to decrease, also thanks to the safeguard clauses (whose effect is equal to
0.7 per cent of GDP in 2019 and to 1.0 per cent from 2020 onwards): as a percentage
of GDP, net borrowing is estimated to fall to 1.2 per cent in 2019, 0.7 per cent in
2020 and 0.5 in 2021. The nominal budget balance, which according to April's
DEF would have been attained in 2020, would now not be achieved in 2021 either.
The primary surplus, while rising gradually to 3.3 per cent of GDP in 2021, would
be lower than last April's estimates by 0.4 percentage points on average each year.
Interest payments are expected to grow steadily, reaching 3.8 per cent of GDP in
2021. The higher interest payments compared with April's estimates, made on the
basis of the interest rates foreseeable at the time, would amount to about €3 billion
in 2019, almost €4 billion in 2020, and about €4.5 billion in 2021. If the tensions
observed in the last two weeks, which have heightened further in recent days, were
to persist, interest payments could be higher than indicated in the Update.
The Update clarifies that the forecasts are made on the basis of the forward rates
observed during the period in which the document was prepared, and the macroeconomic
scenario was developed on the basis of the information available at 22 September 2018.
Ten-year BTP yields have risen by more than 60 basis points in the last two weeks, and
those of three-year securities by more than 90 basis points. To give an idea of the relative
impact, a permanent increase of 100 basis points in the yields of all government bonds
implies that interest payments will be greater by 0.15 per cent of GDP in the first year, 0.3
per cent in the second year, and 0.45 per cent in the third year.
Policy scenario. - Compared with the current-legislation scenario, for 2019
the Government plans to raise net borrowing by more than 1 percentage point, to
2.4 per cent of GDP. In the following two years the deficit is projected to narrow
again, an outcome to which the partial activation of the safeguard clauses and the
resulting VAT increase would also contribute. The remaining safeguard clauses
are not quantified in detail in the Update; as I observed earlier, the Government has
already announced it does not intend to implement the increase in indirect taxation.
In the past, if activated or replaced with equivalent measures, the safeguard
clauses served the purpose of attaining a balanced budget within the planning period.
In the Update they only help to bring the deficit, at the end of the forecasting horizon,
to more or less its starting point in 2018. In fact, the Update does not envisage a
reduction in the structural deficit. Rather, it plans to increase it by 0.8 percentage
points of GDP next year, bringing it to 1.7 per cent, and to keep it unchanged in the
following two years. The Government has announced its intention to resume fiscal
consolidation in 2022, the first year beyond the planning horizon; the resumption
of fiscal consolidation would be brought forward only if, by 2021, real GDP and
employment had returned to pre-crisis levels.
The structural deficit will remain at a significant level for a highly-indebted
country; this does not afford much room for manoeuvre were it to become necessary
to deal with a new cyclical slowdown.
The measures and their impact on the economic cycle. - As I have already
recalled, in the Government's estimates the expansionary stance of the budgetary
measures raises real GDP growth forecasts by about half a percentage point each
year, to 1.5 per cent on average in the next three years.
In 2019 the fiscal policy stance (conventionally measured by the change in the cyclically-
adjusted primary surplus) would be expansionary by almost 1 percentage point; in April's
current legislation estimates, it was expected to be restrictive by 0.4 percentage points. In
the following two years, the stance is expected to be largely neutral.
The macroeconomic effects of the budget depend on its composition and design;
therefore, an assessment will only be possible once the details have been made known.
In any case, the Update provides an insight into the various areas of planned
intervention.
The safeguard clauses on indirect taxes are set to be completely deactivated
next year and redesigned in the following years. According to our assessments and
based on the Bank of Italy's quarterly econometric model, the expansionary impact
of this measure will be limited. This assessment is consistent with the Government's
estimates contained in the Update. The impact could prove even more limited, or
nil, if the decision not to increase VAT was already incorporated in households'
expectations.
At the same time, the plan is to expand the number of those eligible for the
'simplified' taxation system in place for small firms, professionals and tradespeople.
The Government has announced that it intends to introduce a new poverty
reduction mechanism in 2019 ('citizenship income') and to alter the requirements
for pension eligibility, making them less stringent.
An increase in current transfers - such as those relating to social expenditure -
as well as tax relief tend to have modest and gradual cyclical effects; we estimate
that the income multiplier associated with these measures is limited.
As far as the 'citizenship income' is concerned, pursuing the goal of social
protection should not disincentivise the supply of labour. A decisive factor in this
regard is the amount of the benefit in relation to the potential wage that a worker
could earn on the market; looking at the experience of other countries, it should
be possible to develop an appropriate design. This is important not only with a
view to assessing the cyclical impact of the measure on GDP and employment, but
above all in order to refine the tool from a longer-term perspective.
According to the Update, the benefit - the amount of which has not yet been officially
established - will provide income support to people below the relative poverty threshold.
In other countries, the amount of the benefit in proportion to the national relative poverty
threshold is usually less than one.1 For a household of just one member, it is less than 50
per cent on average in the EU countries, with a peak (87 per cent) in the Netherlands; in
Germany it is 39 per cent, in France, 50 per cent and in Spain, 63 per cent.
The conditions that should regulate eligibility for the benefit (especially its
withdrawal after a given number of job offers) cannot be applied effectively unless
job centres are provided with sufficiently increased capacity.
Regarding social security, the requirements for pension eligibility are to
become less stringent; this measure will be set out in detail at a later date. We
have often pointed out that, when making the pension age more flexible, it is
important to respect the actuarial equivalence principle in order to ensure the
long-term sustainability of the pension system, now a key strength of Italy's
public finances.
Based on available research into the effects of past pension reforms that raised the
minimum pension age, it is not possible to maintain that, in the medium-to-long term, an
increase in the employment rate of older workers leads to worse job prospects for young
people,2 particularly in the private sector.
1
Our calculations based on the relative poverty risk indicator for 2016 computed by Eurostat and on information
from the Mutual Information System on Social Protection database (co-ordinated by the European Commission
and updated with the assistance of national experts).
2
For an overview of macroeconomic research, see OECD (2011), 'Helping Older Workers Find and Retain Jobs',
Pensions at a Glance 2011: Retirement-income Systems in OECD and G20 Countries, OECD Publishing.
The Government also plans to allocate additional funds for public-sector
investment, amounting to 0.2 percentage points of GDP in 2019, rising to over 0.3
points in 2021, inverting the trend observed in recent years. Indeed, public investment
has diminished steadily since 2010; in 2017 it represented 2.0 per cent of GDP,
compared with almost 3 per cent on average in the previous decade.
Investment spending can have a significant impact on GDP growth, not just in
the short term but in the longer term as well, if investment helps to achieve a structural
increase in production capacity. The Government's emphasis on the resumption
of a major investment programme is therefore something that can be shared. The
programme's effectiveness will depend on elements that cannot be taken for granted
in Italy: fast implementation, efficient action, and careful selection of projects to
identify those likely to produce a real qualitative and quantitative increase in capital.
In view of the recent contraction, there is probably ample scope to make profitable
investments; but only if they are properly selected and efficiently realised will they
be able to achieve positive externalities for the growth of the economy.3 Given the
time needed to select projects and complete the planning and commissioning phases,
the increase in spending might not become apparent for some time, diminishing the
investment's contribution to growth in the short term.
Funding. - Finally, in order to assess the effects of the budgetary provisions, in
terms of both growth stimulus and public accounts, it will be necessary to look carefully
at how the costs will be covered once the funding measures have been finalised.
According to the Update, part of the funds should come from ending (in whole or in
part) existing programmes such as the inclusion income support scheme, the optional tax
regime offered to some types of businesses (tax on entrepreneurial income or IRI), and the
tax allowance for corporate equity (ACE). Further funding should come from changes to
the tax advance percentage rates and from ministerial spending cuts.
4 The public debt
In the Government's programmes, the debt-to-GDP ratio, which is expected
to reach 130.9 per cent at the end of this year, should decrease on average by
1.4 percentage points a year over the next three years, coming to 126.7 per cent
in 2021.
Compared with the current legislation scenario, the annual decrease in
the policy scenario would be about 0.7 points less, on average: the rise in net
borrowing (on average 1.3 percentage points a year) would be offset only in part
by the increased growth in nominal GDP.
The trend of the debt-to-GDP ratio over the next three years assumes a small
reduction in the Treasury's liquid balance (of about 0.1 percentage points of GDP
per year). It is also based on estimated revenue from disposals of assets of 0.3
percentage points of GDP per year in 2019 and 2020, a figure that is in line with
the amount forecast in the planning documents of the last two years.
The Update contains no details of the planned asset disposals. In the last two years
and in the first nine months of 2018, privatisation receipts have been negligible.
The evolution of the debt-to-GDP ratio depends on the size of the primary
surplus and the gap between the average cost of the debt and the rate of growth of
the economy. Movements in interest rates have a considerable effect. Unlike the
previous year, this year's Update includes neither an analysis of the sensitivity
of the evolution of the debt-to-GDP ratio to growth and interest rate shocks, nor
alternative scenarios for the medium term.
Italy's public debt has a high average residual maturity, more than seven
years, which means that the effect of an increase in interest rates at issue on the
average cost of the debt will occur gradually. Nevertheless, it can be estimated that
at current rates in 2021 interest expense will already be about 0.6 percentage points
of GDP higher than in the projections prepared in April.
In commenting on the DEF in May,4 I had noted that at the interest rates prevailing
at the time, it would have been possible to bring the debt to below 100 per cent of GDP
in about ten years, provided that the primary surplus immediately started to converge
towards 4 per cent of GDP, absent market shocks. If we were to repeat mechanically
the same exercise using current interest rates and assuming that debt consolidation is
resumed in 2022, as indicated in the Update, we would find that we would need another
4
'Preliminary hearing on the 2018 Economic and Financial Document', testimony of the Deputy Governor of the
Bank of Italy, Luigi Federico Signorini, before the Chamber of Deputies, Rome, 9 May 2018.
As the Bank of Italy has pointed out on more than one occasion, the success
of long-term debt reduction is also dependent on how well the public finances can
cope with rising expenditure tied to the ageing population. The Update indicates,
rightly, that the pension reforms introduced in the last 20 years have significantly
improved both the sustainability and the intergenerational fairness of the Italian
pension system.
It is critical that we do not lose ground on these two fronts, especially when
- as demonstrated by the European Commission's latest long-term age-related
expenditure projections - the risks to the sustainability of the public finances are
also increasing due to worsening demographic projections.
* * *
Restoring the Italian economy to a path of sustained economic development is
a structural matter; it depends on the continuation of the reform process of all those
aspects of public action and the functioning of the economy and society that affect
firms' ability to compete. Much has already been done: gross domestic product,
while still lower than it was before the crisis, has risen by more than 5 points since
its 2013 trough; investment has increased by about 15 points; the number of those
in employment, which has risen by more than 1 million, has hit an all-time high.
The productive fabric of the country has strengthened, especially in the export
sector; the difficulties encountered by the banking system have been alleviated
with the improvement in the real economy and the reduction in non-performing
loans; the balance of payments has recorded a current account surplus since 2013;
in June our country's net debtor position was equal to 3.4 per cent of GDP, almost
20 percentage points lower than it was in 2013.
There remain, however, large imbalances in the labour market, widespread
income losses compared with ten years ago, and serious problems of poverty and
social exclusion. Although the worst of the crisis is now years behind us, there is still
much to do to place the Italian economy on a stable path to higher growth. Greater
wealth and job creation is also key to helping those who are most vulnerable.
Public services should be made more efficient, the quality of our human capital
improved, and competitive mechanisms strengthened.
12i
In addition to this, the debt-to-GDP ratio should be lowered decisively. The debt
is, for Italy, the great multiplier of turbulence. Given its size and the need to service
each year a significant amount (around €400 billion), the danger of triggering a vicious
circle between the cost of the debt and its share of GDP, with repercussions on the real
economy, is ever present. Around two thirds of the debt is currently held by Italian
citizens and institutions; but this does not insulate it from the laws of the market,
which seeks out yields and flees from uncertainty. Fluctuations in the value of the debt
also have an impact on the Italian citizens, households, firms and financial institutions
that hold it. Ultimately, a significant portion of our savings is tied to the public debt.
A lower valuation of the government bonds held by banks in their portfolios has
an effect on their capital requirements; above certain limits, it can reduce their ability
to supply credit to the economy.
The Update envisages providing a significant cyclical boost to the economy by
increasing the deficit; to achieve this, we have to assume high multipliers, which
cannot be taken as given. But how effective fiscal policies are in supporting the
economy also depends on whether the government's action is capable of convincing
savers and the markets to remain confident in the process to consolidate the public
finances.
Even assuming the full deployment of the expected expansionary effects of
the budget, the Update envisages a slower reduction in the debt-to-GDP ratio than
both the current legislation scenario and with respect to the possibilities afforded by
today's economic conditions; it postpones the achievement of a balanced budget to
an unspecified date in the future.
Given the large amount of bonds that the Italian State must periodically place on
the market, the possibility that financial turbulence can arise, even unexpectedly, calls
for clarity and certainty in the debt reduction process. Credibility is self-sustaining:
bolstering the confidence of savers and investors brings down the risk premium on
Italy's sovereign bonds, facilitates the debt reduction process and makes it more
secure.
Another matter that deserves attention is the funding of the budgetary provisions.
When specifying the planned measures, it would be advisable to avoid accompanying
permanent expansionary measures with advances of revenue, other temporary
funding measures or safeguard clauses of uncertain application.
Narrowing the growth gap with Europe, as stated in the Update, is a key
objective; it is also necessary to get the debt-to-GDP ratio under control. Higher
growth and greater social cohesion are not at odds with fiscal discipline. Lasting
results can be achieved through budget recomposition: devoting a higher share
to productive investments, sharing the tax burden more equitably, improving
the equalisation capacity of public transfers. These results also rely on structural
interventions to improve the underlying capacity of the Italian economy to post
higher growth, above and beyond short-term stimuli. Any improvement achieved
thanks to public intervention in the areas of income and its distribution will be the
more solid, the more it is rooted in solid funding measures and the more carefully
it is designed to take account of the incentives to create income and jobs, this being
the most reliable way to combat the spread of poverty.
TABLES AND FIGURES
Table 1
Macroeconomic outlook in the most recent official documents
(percentage changes)
Update to the 2018 Economic and Financial
Economic and Financial Document 2018
Document
2017 2018 2019 2020 2021 2017 2018 2019 2020 2021
CURRENT LEGISLATION SCENARIO
Real GDP 1.5 1.5 1.4 1.3 1.2 1.6 1.2 0.9 1.1 1.1
Imports 5.3 5.4 4.0 3.4 3.5 5.2 1.7 2.6 2.9 3.5
Consumption by
Households and non-
1.4 1.4 1.0 0.9 1.2 1.5 1.1 0.7 0.8 1.1
profit institutions
serving households
General government
expenditure 0.1 0.5 0.1 0.4 0.6 -0.1 0.4 0.6 0.6 0.5
Investment 3.8 4.1 2.8 2.4 1.7 4.3 4.4 2.2 1.5 1.6
Exports 5.4 5.2 4.2 3.9 3.2 5.7 0.4 2.7 3.4 3.6
Nominal GDP 2.1 2.9 3.2 3.1 2.7 2.1 2.5 2.7 2.8 2.6
Consumption deflator 1.2 1.1 2.2 2.0 1.5 1.1 1.3 2.2 2.0 1.5
Employment (FTE) 0.9 0.8 0.8 0.9 0.9 0.9 0.7 0.6 0.7 0.8
POLICY SCENARIO (1)
Real GDP 1.6 1.2 1.5 1.6 1.4
Imports 5.2 1.7 3.0 3.8 4.0
Consumption by
Households and non-
1.5 1.1 1.3 1.3 1.2
profit institutions
serving households
General government
expenditure -0.1 0.4 1.1 0.8 0.5
Investment 4.3 4.4 3.7 3.2 2.8
Exports 5.7 0.4 2.6 3.4 3.6
Nominal GDP 2.1 2.5 3.1 3.5 3.1
Consumption deflator 1.1 1.3 1.4 2.2 1.7
Employment (FTE) 0.9 0.7 0.9 1.2 1.1
(1) The 2018 Economic and Financial Document does not contain the policy scenario.
Table 2
Main public finance indicators for general government (1)
(per cent of GDP)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
45.2 45.9 45.7 45.7 47.9 48.1 47.9 47.7 46.5 46.4
Revenue
47.8 51.2 49.9 49.4 50.8 51.1 50.9 50.3 49.1 48.7
Expenditure (2)
of which: interest
4.9 4.4 4.3 4.7 5.2 4.8 4.6 4.1 3.9 3.8
payments
2.3 -0.8 0.1 1.0 2.3 1.9 1.5 1.5 1.4 1.4
Primary surplus (3)
2.6 5.2 4.2 3.7 2.9 2.9 3.0 2.6 2.5 2.4
Net borrowing
Borrowing requirement
3.1 5.5 4.3 3.9 4.1 4.8 4.1 3.0 2.6 3.4
Borrowing
3.1 5.6 4.3 4.0 4.6 4.9 4.3 3.4 2.6 3.4
requirement net of
privatization receipts
102.4 112.5 115.4 116.5 123.4 129.0 131.8 131.6 131.4 131.2
Debt
Source: Based on Istat data for the general government consolidated accounts items.
(1) Rounding of decimal points may cause discrepancies in totals. - (2) The proceeds of sales of public assets are
recorded as a deduction from this item. - (3) A negative value corresponds to a deficit.
Table 3
General government revenue (1)
(per cent of GDP)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Direct taxes 14.7 14.1 14.1 13.9 14.9 15.0 14.6 14.7 14.6 14.5
Indirect taxes 13.6 13.4 14.0 14.1 15.3 14.9 15.3 15.1 14.3 14.5
Capital taxes 0.0 0.8 0.2 0.4 0.1 0.3 0.1 0.1 0.3 0.1
Tax revenue 28.3 28.4 28.3 28.4 30.3 30.2 30.1 29.9 29.3 29.1
Social security contributions 13.0 13.5 13.3 13.2 13.4 13.4 13.2 13.3 13.1 13.1
Tax revenue and social
security contributions
41.3 41.8 41.6 41.6 43.6 43.6 43.3 43.1 42.4 42.2
Production for market and
for own use 1.9 2.0 2.0 2.0 2.1 2.3 2.3 2.3 2.2 2.2
Other current revenue 1.8 1.9 1.9 1.8 1.8 1.9 2.0 1.9 1.8 1.8
Other capital revenue 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.1 0.1
Total revenue 45.2 45.9 45.7 45.7 47.9 48.1 47.9 47.7 46.5 46.4
Table 4
General government expenditure (1)
(per cent of GDP)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Compensation of employees
10.4 10.9 10.8 10.4 10.3 10.3 10.1 9.8 9.7 9.5
Intermediate consumption 5.1 5.4 5.4 5.3 5.4 5.6 5.5 5.4 5.5 5.5
2.7 2.9 2.9 2.7 2.7 2.7 2.7 2.7 2.6 2.6
Social benefits in kind
Social benefits in cash 17.0 18.5 18.6 18.6 19.3 19.9 20.2 20.1 19.9 19.8
Interest 4.9 4.4 4.3 4.7 5.2 4.8 4.6 4.1 3.9 3.8
3.4 3.7 3.7 3.7 3.9 4.1 4.2 4.0 4.0 3.6
Other current expenditure
Total current expenditure 43.5 46.0 45.7 45.4 46.8 47.4 47.2 46.1 45.7 44.9
of which: expenditure net of
38.5 41.5 41.4 40.7 41.6 42.6 42.6 42.0 41.7 41.1
interest payments
Gross fixed investments
3.0 3.4 2.9 2.8 2.6 2.4 2.3 2.2 2.1 2.0
Other capital expenditure 1.4 1.8 1.2 1.2 1.4 1.2 1.4 1.9 1.3 1.9
4.4 5.2 4.2 4.0 4.0 3.6 3.7 4.1 3.4 3.9
Total capital expenditure
Total expenditure 47.8 51.2 49.9 49.4 50.8 51.1 50.9 50.3 49.1 48.7
of which: expenditure net of
42.9 46.7 45.6 44.7 45.6 46.2 46.3 46.1 45.1 44.9
interest payments
Source: Based on Istat data.
(1) Rounding of decimal points may cause discrepancies in totals.
Table 5
General government borrowing requirement
(billions of euros)
Year First 7 months
2015 2016 2017 2016 2017 2018
Borrowing requirement net of privatization 56.9 44.1 58.8 22.5 46.5 24.1
receipts (a)
Privatization receipts (b) 6.6 0.9 0.1 0.8 0.1 0.0
Borrowing requirement (c=a-b=d+e+f+g+h+i) 50.4 43.2 58.8 21.7 46.4 24.1
FINANCING
5.1 -4.9 0.0 -5.4 8.7 7.6
Currency and deposits (1) (d)
of which: Post office funds -1.5 0.1 -1.9 -0.6 -1.1 -0.7
-9.5 -8.0 -0.5 2.3 8.9 6.7
Short-term securities (e)
Medium- and long-term securities