Regions

Italy needs supply-side reforms to fuel growth- IMF

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October 19
10:47 AM 2013

Italy's growth has been hampered with high debt, an unstable government, red tape and low growth. According to a Reuters report, these were some of the reasons that made the country the weakest link in the Euro Zone. In the past two decades, Italy has posted an average growth of only 0.7% annually. This year, it would still be in the midst of a recession.

In its most recent assessment of Italy, the International Monetary Fund (IMF) said the country would need reforms for its supply side to enhance productivity and increase growth potential. IMF said the country should inject competition into its product markets. The Fund said Italy should also improve the delivery of its public services.

In addition, the IMF said Italy should reduce taxes on capital and income. The tax reduction would reportedly allow the state to fuel growth and employment. IMF said Italy should pay special attention on its tax wedge or the difference reflected in the employer's total labor cost and the net take-home pay. Last year, Italy's tax wedge was pegged at 48%. This was considerably higher than the 36% average posted by the members of the Organization for Economic Cooperation and Development.

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