ROME – A new analysis of the Vatican’s financial situation by an Italian news outlet contains both good and bad news for papal finances, pointing to relative success in efforts to contain ballooning deficits but also seemingly irreversible long-term declines.

According to an overview of the most recent financial data published July 26 by La Repubblica, Italy’s most widely read daily newspaper, the Vatican’s annual operating deficit grew by roughly $5.4 million in 2023, a lower figure than in past years. The report suggested the result was due to the impact of both spending cuts and also efforts to generate more realistic appraisals of the value of Vatican properties.

Among the cost-cutting measures adopted in recent years include new limits on hiring and contracting, as well as efforts to increase the rents collected on some Vatican properties which are leased commercially and to put others up for sale.

The report cited a recently completed financial statement approved by the Vatican’s Council for the Economy, led by German Cardinal Reinhard Marx. According to the report, the deficit for 20234 amounted to over $90 million, with income of $1.25 billion and expenses of $1.34 billion.

Income in 2023 actually grew by $30 million, according to the financial statement, but expenses also went up by $36 million due to the impact of inflation.

The statement also indicated that the size of the 2023 deficit could still shrink somewhat depending on what the actual performance of the Vatican’s investment portfolios match projections.

The Repubblica analysis also found that income from the annual Peter’s Pence collection, which supports the works of the pope, amounted to $52.5 million in 2023, an increase over the $47.2 million collected in 2022.

Nonetheless, the net gain from the collection was offset by the fact that the fund’s reserves were once again draw upon in 2023 to support the Roman Curia, the Vatican’s chief administrative bureaucracy, to the tune of almost $98 million.

Moreover, the long-term trend in income from the fund is clearly downwards. According to the Repubblica analysis, collections dropped 23 percent overall from 2015 to 2019, and are poised for further reductions.

To some extent, those declines may be related to financial scandals, such as the aborted $400 million purchase of a former Harrods warehouse in London that resulted in the criminal convictions of nine figures for fraud, including Italian Cardinal Angelo Becciu. Given that Peter’s Pence also is sometimes viewed as a referendum on the popularity of the current pope, various controversies surrounding Franci may also have had an impact.

More basically, however, most observers believe the core factor is that much of the Peter’s Pence income derives from wealthier nations, where Catholic populations, and therefore Catholic giving, have been in decline for decades.

Declines in income are especially worrying for Vatican accountants today, given concerns about an aging workforce and unfunded pension obligations down the line. There’s also alarm that rising costs and declining income could eventually compel the Vatican to either trim its payroll or cut salaries, or both, at time when both the volume and the complexity of the workload from around the world is increasing rapidly.

The financial statement reportedly approved by the Council for the Economy concerns the Holy See, and mostly excludes both the Government of the Vatican City State, which is responsible for administration of the physical territory – including income, for example, from the Vatican Museums – and also excludes the Institute for the Works of Religion, the so-called “Vatican bank,” which for 2023 showed $33.2 million in income and a total of $5.9 billion in client assets.

However, it’s considered improbable that income from either the city state or the IOR will be sufficient in coming years to offset the Vatican’s broad deficits, leaving it unclear for the moment how the losses will be sustained.