Pnrr, the difficulties of goals. Cgia: “Impossible to reach them, the effect on GDP is modest”

Our country’s historic difficulty in using all the money that comes to us from Brussels now seems like a rule. This is what the CGIA points out: with reference to cohesion funds, for example, there are quite a few those referring to the seven-year period 2014-2020 which, by the end of this year, we risk losing, although the hypothetical annual expenditure necessary to make land all available resources amount to only 9 billion. By tackling the PNRR with the same approach just illustrated, between 2023 and 2026 we will have to spend an average of 42 billion euros a year to be able to carry out all the projects envisaged in the plan. A figure, the latter, 4.5 times higher than the previous one. It is evident that achieving this objective will be almost impossible.

The comparison

Let’s get into the merits. Of the 64.8 billion euros of European cohesion funds made available to Italy in the period 2014-2020, of which 17 from national co-financing, just under half (29.8) we still have to spend it. If we don’t do it by the end of this year, the unused portion must be returned. This is yet another demonstration that our country is struggling very much to spend the money made available to us by the EU within the established deadlines. If, on the other hand, we manage to do so, in purely theoretical terms it is as if we had spent 9 billion euros every year of these seven years. With the PNRR, on the other hand, between 2021 and 2026 we will have to invest 191.5, equal to an average expenditure that allows the overall use of 42 billion euros a year in the period 2023-2026. Well, if, as we said above, we are struggling to put 9 of EU funds on the ground a year, how are we going to spend even 42 with the PNRR, or 4.5 times as much?

In Italy works last an eternity

According to the Bank of Italy, for a median investment of 300 thousand euros, in our country the median duration for the construction of a work is 4 years and 10 months. The planning phase lasts just over 2 years (equal to 40 percent of the total duration), the assignment of the works lasts 6 months and more than 2 years are needed for execution and testing. For an investment of five million euros, on the other hand, the construction time is 11 years. Hoping that the new procurement code and the reforms that will affect our Public Administration will significantly reduce these times, it is however clear that within the next 44 months we will hardly be able to ground all the projects envisaged by the PNRR.

PNRR: many investments, but low profitability

Our PNRR is made up of 235.6 billion euros, of which 191.5 attributable to the Recovery Fund, 30.6 to a supplementary fund and the other 13.5 billion to REACT-EU. Of these 235.6 billion, 52.6 will be invested for “existing projects”, or already planned, while the remaining 183 will go to finance “new projects”. Therefore, in 2026, GDP growth, the year in which the action of the Plan will end, should be 3.6 percentage points higher than in the scenario that would occur without the effect of additional investments. A forecast, the latter, which is prefigured in the optimal scenario, ie that investments are spent efficiently, that monetary conditions are favorable and that there are no negative repercussions on the sovereign risk premium. Conditions that, of course, no one can confirm to us that they will occur. If, with respect to what has been reported, the general picture were less optimistic, our PNRR hypothesizes 2 other scenarios: an average one with GDP growth of 2.7 per cent and a low one with an increase of 1.8 per cent.

A modest effect on GDP

Analyzing only the optimal scenario, the CGIA Research Office reports that against 183 billion of investments, in 2026 we will have a structural increase in GDP of around 70 billion, resulting in a GDP multiplier of 1.2. A result that is not particularly exciting, if one takes into account that, according to a study by the Bank of Italy, the construction of public works can have important repercussions on the economic growth of a country if the multiplier of public investment expenditure is between 1 and 2. It is true that the 1.2 percent envisaged by the Draghi government in the PNRR would fall within the range indicated by the Bank of Italy, but it is equally true that we will only achieve this goal if everything goes the right way; something that many observers doubt, given the chronic inefficiency that characterizes a large part of our Public Administration, the amount of bureaucracy that grips the country, the historic inability, as we said above, to spend all European funds. Furthermore, it should be remembered that Italy does not arouse high reliability in terms of macroeconomic forecasts. The data of the European Fiscal Board (independent advisory body of the European Commission) are merciless: between 2013 and 2019 we were the country that made the most mistakes. Another reason to doubt that we will be able to achieve GDP growth of 3.6 percent and, consequently, have a multiplier of 1.2.