Italy will struggle to achieve the growth rate that the anti-establishment government has planned for 2019, according to Morgan Stanley.
In its latest 2019 budget draft plan, Rome forecasts a growth rate of 1.5 percent for 2019 — compared to Morgan Stanley's latest forecast of just 0.5 percent for gross domestic product (GDP) next year. The figure showing the investment bank's forecast is only one-third of the Italian government's own estimate.
"We expect a contraction in economic activity towards year-end, mainly driven by domestic demand, both consumer spending and business investment," the bank said in its European Economic Outlook note, published this week.
"Further out, the fiscal boost to growth will probably have some beneficial effects on consumption. But it's unlikely to be so big as to result in an improvement of the public finances," the note added.
The Italian government expects increased spending on infrastructure projects and providing people with more income will revive the subdued Italian economy.
Giovanni Tria, the Italian finance minister, said in a letter to the European Commission earlier this month that "tackling the social problems caused by the negative trend in the economy is equally important and urgent."
The idea is to put forward a Citizenship Income, aimed at alleviating poverty and improving social inclusion. Such a policy is set to cost 0.37 percent of the country's total growth in 2019. Morgan Stanley also noted that market conditions and a drop in exports will lead to lower growth rates in 2019.