Italian State Finances Can Absorb Shock Due to Middle East Crisis, Finance Minister Says

Italian State Finances Can Withstand Middle East Crisis, Says Finance Minister

Italy's Economic Outlook Amid Middle East Tensions

By Giuseppe Fonte

ROME, March 28 (Reuters) - Italian state finances can absorb the negative impact of the crisis in the Middle East, Economy Minister Giancarlo Giorgetti said on Saturday, as the government prepares to update budget targets and growth estimates for 2026 and the following years.

Deficit Targets and EU Compliance

Giorgetti said he was still hoping for a downward revision of last year's deficit to 3% of national output from 3.1% by national statistics office ISTAT, a move that would allow Italy to exit the EU's excessive deficit procedure this year, ahead of time.

Economic Strength and Conference Remarks

"We are facing this crisis from a position of relative strength because the numbers of our economy are not exceptional, but they are certainly positive," Giorgetti said, addressing a finance conference in Cernobbio, northern Italy.

Growth Projections and Government Expectations

Prime Minister Giorgia Meloni's government expects Italy’s economy to grow by 0.5% or 0.6% this year and 0.7% in 2027 under an unchanged policy scenario, a source familiar with the matter said.

Both forecasts are slightly below the GDP growth targets set by the government in September, which are 0.7% and 0.8% respectively.

Government Sees Slower Growth Ahead

The figures, still subject to revision before their publication by April 10, do not include the impact of potential stimulus measures the government may adopt in the coming months to help households and firms cope with higher energy prices.

Absorbing the Shock of the Iran War

"State finances are currently in a position to absorb the shock of the Iran war," Giorgetti said, despite the darkening economic outlook.

Fiscal Policy and EU Relations

Italy failed last year to bring its deficit within the European Union's 3% of GDP key ceiling, as initially planned, but ISTAT said the figures could be revised by April 21, should additional information become available.

The Treasury set in September a 2.8% goal for this year's deficit-to-GDP ratio.

Calls for EU Coordination and Energy Security

Giorgetti also called for a coordinated EU-wide approach to adopt measures to deal with the crisis, and said Italy was not currently experiencing any shortages in energy supplies.

Government Measures and Industry Response

The government has set aside some 417.4 million euros ($480.34 million) to cut excise duties on fuels until April 7, but prices have changed little and industry lobbies are pushing for more effective steps.

"We will be listening to the various groups to identify the most pressing issues," Giorgetti said.

Exchange Rate Information

($1 = 0.8690 euros)

(Reporting by Giuseppe Fonte, Editing by Louise Heavens)