By Giuseppe Fonte
ROME (Reuters) -Italy sees this year’s budget deficit at around 3% of national output (GDP) or slightly below, people familiar with the matter told Reuters on Monday, as the government finalises its new multi-year budget plan to be unveiled this week.
Rome in April had estimated a deficit of 3.3% of GDP in 2025, but higher-than expected tax revenue and lower interest paid on sovereign bonds mean the fiscal gap will be lower, the sources said, asking not to be named.
Although the figures are subject to possible slight changes ahead cabinet approval, the Treasury is confident the deficit will fall this year to 3% of GDP or lower, from 3.4% in 2024, the sources said.
The cabinet meeting to sign off on the numbers is expected to be held on Thursday.
A deficit-to-GDP ratio at or below 3% would allow Italy to exit the EU’s infringement procedure for countries running excessive deficits by mid-2026, one year ahead of schedule.
The procedure restricts offending countries’ flexibility with regard to taxation and spending policies, as they must cut their fiscal deficit by a prescribed amount each year.
The sources said Italy’s 2.8%-of-GDP deficit goal previously set for next year would also be revised downwards, without giving further details.
Once it has exited the EU’s procedure, Italy will be able to assess next year, probably in the autumn, whether to activate the bloc’s so-called “escape clause” designed to boost defence spending.
This would allow it to widen its deficit again without triggering new disciplinary proceedings.
The new budget framework will target gross domestic product in the euro zone’s third largest economy to grow by 0.5 or 0.6% this year and by around 0.8% in 2026, the sources said, broadly in line with previous estimates.
Under an unchanged policy scenario the economy would grow by 0.7% in 2026, they said, but the government expects that the positive impact of tax cuts and higher spending to be adopted in the upcoming 2026 budget will provide a modest boost.
(Reporting by Giuseppe Fonte, editing by Gavin Jones)
Comments