Italy Is A Classic Example Of Kicking The Can Down The Road
Jeroen Blokland | Apr 16, 2019 08:46
Italy’s nominal GDP growth fell to 1.7% in 2018, the slowest pace in four years. For this year, nominal GDP growth is likely to come in even lower, based on current real GDP growth and inflation estimates.
With the expected budget deficit for 2019 having been revised upwards to 2.5% of GDP, Italy’s debt-to-GDP ratio will almost certainly rise this year. After Greece, Italy is already the country with the highest debt-to-GDP ratio, a massive 132%, in the Eurozone.
Unlike Greece, however, Italy has not officially been given time and low interest rates to get rid of its debt pile. So far, it has been the ECB that has been kicking the Italian can down the road with its bond-buying program and ultra-low short-term rates. But when another wave of investor concerns about debt sustainability hits, perhaps somewhere near the end of the year as new budget negotiations take place, central bankers and other policymakers might have to look at other ways to postpone dealing with debt problems.
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