14 September 2022
During the 48th annual Forum by The European House – Ambrosetti, we presented the outcome of the Observatory made to study and monitor the themes of Italy’s National Recovery and Resilience Plan (NRRP, Piano Nazionale di Ripresa e Resilienza or PNRR in Italian), which has led us to an assessment of the structural impact it could have on the national GDP, over the long term.
Italy has respected the commitment to achieve all 45 goals and objectives of the NRRP that were set for the first half of 2022, and sent to the European Commission the request for payment of the second instalment, amounting to 24.1 billion euros. Overall, there were 44 (qualitative) and 1 (quantitative) targets covering a wide variety of topics, ranging from green and digital transformations to reforms of the Procurement Code, Public Administration and the career of teachers. It should be noted, however, that many of these achievements are in fact preconditions: they are, for the most part, investigations, publication of calls for proposals, start-up work, presentation of reports and organizational plans. By the end of the year, 55 additional conditions (including 23 relating to reforms and 32 relating to investments) will have to be met.
The NRRP Observatory has estimated that the investments with structural impact – on a grand total of 191,5 billion euros – amount to 66,6 billion euros (34.4% of the total). Overall, the impacts could amount to 1.9% of GDP (between 1.3% and 2.6%) by 2026 (if compared to the a growth scenario without investments from the NRRP).
In particular, we have identified and analysed 5 dimensions that have contributed to the scarce growth of the Country and to which the NRRP may potentially remedy: low propensity to investments by companies (estimated impact of approximately 1% of GDP), logistic and infrastructural criticalities (0.1%), low employment rate (0.6%), stagnation in the labour market (0.1%), and low digitisation of public administration (0.2%).
The structural impacts of the NRRP will enable a lasting increase in the average growth rate of Italy’s GDP: assuming that its effect will fade in a decade, by 2036 the GDP differential would be around 221 billion euros.
The green transition in the NRRP
The NRRP allocates 71.1 billion euros (37.5% of total resources) to the green transition, thus exceeding the European Commission’s minimum requirement of 37% of the resources of the Next Generation EU programme. Of the 281 measures included in the NRRP, the European Commission classified 108 of them as green measures: 51% of them reach a 100% assessment coefficient for the green transition (55 measures), the remaining were estimated at 40% (53 measures). In order to analyse the contribution of the NRRP to the green transition, several macro themes have been considered: mobility, energy efficiency, energy from renewable sources, and reduction of total CO2 emissions.
The Plan's mission 2, "Green Revolution and ecological transition", has the objective of reducing CO2 emissions: we estimated a reduction up to 19.2 million tons by 2026, about 5% of the recorded emissions in Italy in 2019. Italy is moving in the right direction in its path to reduce CO2 emissions, if compared to the “National Integrated Plan for Energy and Climate”’s forecasts; however, in the light of the changes introduced by the "Fit for 55" initiative, the contribution of the NRRP will not be enough to reach the target set for 2030.
The digital transition in the NRRP
The NRRP also allocates 48.1 billion euros (25.1% of total resources) for digital transition, thus exceeding the European Commission’s minimum requirement of 20% of the resources of the Next Generation EU. Most of the investments made towards digitisation (around 68%) is managed by the public sector, addressing the need for digitisation of the management and provision of public services and public infrastructure; the share of expenditure managed by the private sector, limited to measures for "Digitization of enterprises" and part of the investments in "Research and Development", is therefore less than 1/3 of the total (32%).
Of the 281 measures included in the NRRP, the Commission has classified 93 of them as "digital": 86% of them have reached a 100% assessment coefficient for the digital transition, the remaining were around 40%. According to our estimates, about 53% of these resources will contribute directly to the achievement of the targets of the "Digital Compass" of the European Commission by 2030, which are based on four cardinal points: digital transformation of businesses; digitisation of public services; basic digital skills; secure and sustainable digital infrastructures.
Reforms are the real key to success of the NRRP
In conclusion, it is noted that, although the investment is unprecedented, the expected results are not enough to fully achieve the goal of decarbonisation and, to a lesser extent, digitisation.
Indeed, what could make the difference are reforms. The reforms (both those of a strategic nature, such as those related to the streamlining of bureaucracy, both sectoral, such as the simplification of legislation on photovoltaics) will solve many of the critical issues that have historically held back investment in Italy, enabling and facilitating the intervention of privates, whose investments are essential to achieve the green and digital objectives set by the European Commission.
The NRRP should not be seen as the definitive solution to every problem in the country: although its contribution is significant, some areas are not affected (such as, for example, training, upskilling and reskilling in strategic sectors). It is therefore necessary to broaden the spectrum of action beyond the NRRP on all strategic issues.
Drawing on the Spanish model?
In this view, it may be interesting to borrow an idea provided for in the Spanish National Plan, namely the PERTE projects (Proyectos estratégicos para la recuperación y transformación económica). PERTE projects are strategic projects with a great drive for the economic growth, employment, and competitiveness of the Spanish economy. Given their importance, they require a high level of public-private and cross-border collaboration among many administrations. These projects envisage a structured and permanent governance for each project, as to allow the stakeholders to participate in the decision-making process, involving both public actors (Ministries and Territorial Communities) and private actors (businesses, trade associations, and trade unions). This is an approach that can be borrowed in Italy – not necessarily within the NRRP’s scope of action.
Download the full report “Osservatorio PNRR: a un anno dal varo” (in Italian)
Download the presentation by Valerio De Molli (in Italian)