By Gavin Jones
ROME (MktNews) - The Italian government has lowered its official 2001 real GDP growth forecast to 2.5% from 2.9%, while revising up its inflation projection -- based on the main domestic index (NIC) -- to 2.3% from 1.7%, and lifting its target for the public deficit-to-GDP ratio to 1.0% from 0.8%.
The revisions are contained in the summary of a forecasting document, the so-called 'first quarter cash report,' which was issued by the Treasury late Wednesday. The Treasury generally releases what it considers to be unwelcome news late in the evening.
Treasury Minister Vincenzo Visco had already said that the government's previous forecasts, as set out in its stability program sent to Brussels at the start of this year, would be have to revised, and the new deficit and inflation projections broadly confirm his indications regarding the extent of the revisions.
The new 2001 growth forecast of 2.5%, however, is below the 2.6-2.7% figure which newspapers had anticipated on the basis of Visco's comments. He had spoken of a "slight" revision, and until recently had argued that the projections of Italian growth around 2.4% or 2.5% by some international organizations were "too pessimistic."
While GDP growth in the fourth quarter of last year came in stronger than expected, it was strongly export led, suggesting it may be vulnerable to the slowdown in world demand.
This year, industrial output in January posted a sharp month-on-month fall and forward indicators point to another clear drop in February, while February's business confidence index released on Tuesday showed the steepest monthly drop since January 1996.
The government's new growth forecast is broadly in line, or just a shade above the market consensus, while the inflation forecast and the deficit target will still be considered too optimistic.
The market consensus for 2001 inflation (NIC) stands at 2.5%, the same result as last year. Preliminary data for March pointed to a 2.8% year-on-year rate.
It will be noted that the government's new 2.3% projection is significantly above the ECB's reference ceiling for price stability in the eurozone.
Public deficit data came in worse than expected for each of the first three months of this year. Several prominent think-tanks have forecast a 1.3% deficit-to-GDP ratio, which was also the median projection in Market News International's most recent monthly survey of analysts.
Among other revisions in the document, the Treasury marginally lowered its target for the 2001 primary surplus to 5.2% from 5.3% in its stability program and, on the positive front, lowered its debt-to-GDP target to 106.2% from 106.6%, after last year's ratio came in significantly below expected at 110.2% The summary of the Treasury's document is published on its web-site (www.tesoro.it).