OECD, fiscal consolidation more difficult for Italia in the future
A new report highlights rising expenditure and the need for structural reforms to support productivity and improve the labour market
"In the coming years, tensions on defence, pension and climate change-related spending will increase while public investment needs will remain important, which will complicate the consolidation" of public accounts. This is the picture painted by the fact sheet on Italia in the first OECD report on the foundations of growth and competitiveness, presented today in Paris. The report sets out three recommendations for our country: reduce the deficit using windfall revenues, set more ambitious savings targets and increase revenues by fighting tax evasion.
Improved performance over the past decade, but not enough
The report shows that since the crisis of the early 2010s, Italy's economic performance has progressed and output per inhabitant is increasing. "Employment growth," writes the OECD, "has been the driving force behind this improvement. Unemployment has fallen to historically low levels and more women and seniors have been brought into work. Investment has increased'.
Productivity also improved in the late 2010s, but 'has since weakened'. According to the report, the Pnrr was "the origin of an ambitious programme of structural reforms and public investment aimed at boosting productivity", but "increasing the rate of economic growth will require facing the headwinds of the rapidly ageing population, amplified by an activity rate of women and youth that is weaker than in most comparable countries, despite recent progress".
Improving training and business support
In order to overcome the current situation, with youth and female employment rates lower than the OECD average, the report suggests "improving the functioning of the labour market, in particular, for those workers coming onto the labour market, maintaining investment in the quality of training, continuing to reduce tax and social levies on labour income, encouraging the social partners to reform collective agreements" but also "reducing the scope of non-compete clauses to reduce obstacles to mobility between companies".
Supporting private investment to stimulate growth
According to the Parisian body, 'supporting private sector investment, especially in research and innovation, would increase productivity growth'. It also recommends 'ensuring sustained and credible progress on public debt, consistent with the medium-term structural objectives'. The burden of pensions and other expenditures limits the room for investment or tax relief, so incentives to private individuals are an important measure for long-term growth.
