The Italian finance ministry is set to release updated fiscal plans Wednesday, with analysts contemplating another dispute with the EU and volatility in the country's bond market.
div > div.group > p:first-child"> According to press reports over the weekend, the plans are likely to show a revised 2019 budget deficit and growth of just 0.3% for this year — down from an earlier 1.0% prediction. For 2020, the numbers are expected to show a deficit of 2.1% of its gross domestic product, from a previous 1.8% target.
After a tense couple of months, the Italian finance ministry eventually revised the 2019 deficit forecast to 2.04% to avoid sanctions. Financial assets recovered with 10-year bond yields falling back after hitting highs of 3.68% in October. Yields move inversely to sovereign debt prices. "As a rule of thumb, every 1% drop in economic growth poses about 0.5% slippage to the budget deficit," Nomura's Chief European Economist George Buckley told CNBC's"Street Signs" this week.
Unless alternative funding is found , VAT is scheduled to go up to 25% in 2020 and 26.5% in 2021 from current level of 22%. The updated 2020 budget is expected to still include the VAT hikes.
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