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Italy can cut massive public debt with migrant inflows, Treasury data shows

Italy can cut massive public debt with migrant inflows, Treasury data shows

Italy, the most indebted country in the euro zone after Greece, could cut its public debt faster if it keeps on taking in large numbers of migrants, Treasury data showed on Thursday.
The Treasury estimates that a 33% increase in registered migrants in Italy would lead to a fall in public debt in 2070 by "over 30" percentage points more compared to a no-migrants-growth scenario.

The assumption behind the ministry's forecast, widely accepted among economists, is that an increase in migration numbers results in a larger workforce, which in turn helps boost economic activity.

The findings, contained in the ministry's Economic and Financial Document (DEF) approved this week, come as Prime Minister Giorgia Meloni's right-wing government is struggling to manage a surge in migrant arrivals from North Africa.

"Given the demographic structure of migrants entering Italy, the effect on the resident population of working age is significant," the Treasury said.

The DEF also said migrant inflows can offset the negative impact on public debt of a shrinking population. Births in Italy dropped to a new historic low below 400,000 in 2022, national statistics bureau ISTAT said last week.

With one of the world's oldest populations, low birth and employment rates, Italy has too few workers to support a growing army of pensioners, many of whom left work when the system allowed much earlier retirement than now, causing pension spending to balloon.

Pension expenditure, the highest among members of the 38-nation Organisation for Economic Cooperation and Development (OECD), is expected to reach a peak of 17.4% of GDP in 2036, from the current 16%, before falling and stabilising around under 14% of GDP in around 2060-2070, the DEF said.

Italy's public debt is targeted in the DEF to fall to 140.4% of gross domestic product (GDP) in 2026 from 142.1% this year.

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