Italy's budget deficit could fall below 3% of GDP this year, Finance Minister says

ROME (Reuters) -Italy's budget deficit could fall below the European Union's ceiling of 3% of gross domestic product (GDP) this year, ahead of time, Economy Minister Giancarlo Giorgetti said on Saturday.

The government pledged in April to cut the fiscal deficit to 3.3% of GDP this year, down from 3.4% in 2024, with a further decline to 2.8% expected in 2026.

But a steady increase in tax revenue has raised the prospect of faster-than-expected deficit reduction.

In the first seven months of the year, tax revenue rose on an annual basis by 5.3% or more than 16 billion euros ($18.79 billion) in absolute terms.

When asked about the possibility of the deficit dropping below the 3% ceiling as early as this year, Giorgetti said: "It is possible." He made the comments while attending a meeting of EU finance ministers in Copenhagen.

Reducing the fiscal deficit to less than 3% of GDP this year would allow Italy to exit the EU infringement procedure for excessive deficits by mid-2026. Brussels started disciplinary budget steps against Italy in 2024.

These restrict countries' flexibility with regard to taxation and spending policies as they must cut their fiscal deficit by a prescribed amount each year.

"The opportunity to exit the procedure is real, and it is in the country's interest to seize it," Giorgetti said.

($1 = 0.8515 euros)

(Reporting by Giuseppe Fonte. Editing by Jane Merriman)