Italy sees end-2020 debt-to-GDP ratio at 155%-159% – sources

ROME (Reuters) – The Rome government sees Italy’s debt-to-GDP ratio surging to between 155% and 159% of national output this year, sources close to the matter told Reuters, as it increases borrowing to mitigate the impact of a lockdown to fight the new coronavirus.

At the end of last year, the ratio stood at 134.8%.

The cabinet is expected to meet on Wednesday to update its economic and public finance goals, one of the sources said, asking not to be named because of the sensitivity of the matter.

Italy’s budget watchdog (UPB) on Tuesday forecast a drop of 15% in gross domestic product in the first half of the year, a contraction “never before recorded in the history of the (post-war) Republic”.

Deaths from the COVID-19 disease caused by the coronavirus in Italy rose to more than 24,600 on Tuesday, the second-highest tally in the world after the United States.

The government of the anti-establishment 5-Star Movement and the centre-left Democratic Party has closed all non-essential businesses, including car, clothing and furniture production until May 3, thrusting the economy into a deep recession.

Over the whole year, the economy ministry expects GDP to fall by around 8%, sources told Reuters on Monday.

Trying to contain the damage, Prime Minister Giuseppe Conte on Tuesday promised new stimulus measures by the end of the month worth at least 50 billion euros (44.2 billion pounds) , on top of a 25-billion-euro package already approved in March.

The annual budget deficit is seen rising to close to 10% of GDP, a senior official told Reuters last week.

Italy, which sits on a public debt totalling more than 2.4 trillion euros, has resorted to costly syndicated placements to meet its increased funding needs.

The Treasury on Tuesday priced 16 billion euros of a dual-tranche syndicated bond, with orders of more than 110 billion euros.

It is also considering ways to fuel demand among small investors. Low interest rates in recent years have led the public to gradually reduce their holdings to below 5% of the outstanding debt, compared to 13% a decade ago.

Writing by Giuseppe Fonte; Editing by Kevin Liffey

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