ElectionsItalyPolitics

Italy: Post-elections outlook

The new M5-NL coalition began forming the government and we expect the next two months to be largely dedicated to nominating the various branches of government. Comments from various senior officials have clarified the timing of policy changes, confirming our expectation that in 2019 only the flat tax for corporates and the pension age change will take place. The next priorities will be the job market changes, the minimum income measure and the household income tax. Overall, we think the government could have a positive effect on real GDP growth in the near term and support an improvement on potential growth. That being said, the most critical elements will be in the small details and the coherence of implementation. We flag two important topics to monitor in coming months: the appointments to the publicly owned companies and the reform of the tax payments.