The OECD said in its latest Economic Survey of Italy on Monday that, after a "modest" recovery, the Italian economy is weakening. "GDP is projected to contract by 0.2% in 2019 and expand by 0.5% in 2020," the report said. "Expansionary fiscal policy and low growth will push the general government budget deficit to 2.5% of GDP in 2019 from 2.1% in 2018.
"The 2019 budget rightly aims to help the poor but its growth benefits are likely to be modest, especially in the medium term".
The public debt as a share of GDP remains high, at 134%, and is a source of risks, the OECD said.
The government had forecast growth of 1% this year and was aiming to keep the deficit-GDP-ratio within 2.04%.
But several national and international bodies have revised down their growth forecasts after Italy slipped into recession in the second half of 2018.
On Sunday Economic Minister Giovanni Tria said that "the most productive part of the Italian economy, manufacturing for exports, is stationary". The report was critical about the government's flagship measures - the 'citizenship wage' basic income and 'quota 100' pension reform that lowers the retirement age for some people. "The reduction in the retirement age - to 62 years with at least 38 years of contributions - will lower growth in the medium run by reducing work among older people and, if not actuarially fair, will worsen intergenerational inequality and raise the public debt," it said.
The new basic income citizenship wage risks "encouraging informal employment and creating poverty traps," it said.
"The Italian economy has many strengths. Exports, private consumption, investment flows and a dynamic manufacturing sector have driven growth in recent years while labour market reforms have helped raise the employment rate by three percentage points since 2015," said OECD Secretary-General Angel Gurría as he presented the report in Rome.
"But the country continues to face important economic and social challenges. "Tackling them requires a multi-year reform package to achieve stronger, more inclusive and sustainable growth, and revive confidence in the capacity to reform."
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