For 2023, Italian GDP growth of 0,6% is estimated, compared to the 0,7% inferred from the quarterly series. A slight increase is expected for 2024 acceleration of GDP, to 0,8%; after a still weak first quarter, due to persistent global tensions, growth should gradually strengthen, benefiting from lower inflation and the acceleration of foreign demand. In 2025, GDP is expected to grow by 1,1%, provided that the international geopolitical context improves and that monetary policy takes the path of normalization. These are the estimates contained in the Note on the February economic situation drawn up byParliamentary Budget Office, containing macroeconomic analyzes for the three-year period 2023-2025.
Upb: worsened forecasts, downside risks
The PBO makes two clarifications on the estimates relating to Italian economic growth: "the forecasts are based on the hypothesis of the complete implementation of the PNRR investment programs and on the expectation that geopolitical tensions in the Middle Eastern area will dissipate in the short term", points out. And again: “the PBO forecasts have worsened slightly compared to those formulated in October for the validation of the Nadef macroeconomic framework. The revisions are mainly attributable to the deterioration of the international context (conflicts in Middle East and unfavorable trends of relevant trading partners, such as Germany). The macroeconomic framework is therefore subject to various risks, overall oriented downwards".
In detail, compared to the macroeconomic framework formulated by the PBO last October for the validation of the Nadef, the lower GDP growth (two tenths of a point on average for 2024-25) is due to the deterioration of international trade assumptions and the slight appreciation of the exchange rate.
“The prospects of the Italian economy are exposed to multiple risks, which are overall unfavorable,” the organization highlights. Which? Sources of uncertainty come from international geopolitical factors (war in Ukraine and the Middle East), which could slow down global trade. “The robust recovery of international trade for 2024, however, is essential to materialize the acceleration of Italian GDP in the two-year forecast period,” we read in the note.
Tensions in the Red Sea may impact prices
Regarding the effects of price tensions, increases in transport costs caused by the attacks in the Red Sea could affect consumer prices in Italy by a couple of tenths of a percentage point over a two-year horizon.
“Overall, the decline in inflation represents a key pillar of the macroeconomic framework and the evolution of prices this year will depend greatly on external variables, such as the costs of raw materials. Furthermore, as already reported by the PBO, there are critical issues related to the efficient use of European funds from the Next Generation EU programme (NGEU) by Italy. Finally, there are factors of uncertainty regarding monetary policies and the reform of the governance of public finances in the EU, in particular for the timing of the next developments”, continues the analysis.
Inflation has peaked on both sides of the Atlantic
The aggressive monetary policies to combat inflation in 2023 have "achieved significant results, also favored by the decline in raw material prices", underlines the PBO.
The sharp decline in boththe euro area (at 2,8% in January) and in the United States (at 3,4% in December), however, this is accompanied by the greater stickiness of underlying inflation. Inflation expectations appear relatively stable, in the range between 2,0 and 2,5 percent. As regards theItaly, 2023 was a year of decline in inflation (5,7% NIC index), in the wake of the energy component, which became deflationary in the autumn. “However, the prices of food and services have accelerated, leading to a non-negligible drag on 2024,” the note reads. However, underlying inflation increased in 2023 (5,1%), as did that relating to the shopping cart, which reached a very high value in historical comparison (9,5%), with a very significant impact on budgets. of families with lower incomes.
On a general level, the return of inflation and the expectations of a reduction in reference rates in the euro area have favored the decline in yields on ten-year bonds. For the sovereign debt issued by Italy there was a slight recovery in confidence, as a result of which the spread between the yields of BTPs and Bunds also narrowed.
Italy in 2023
The PBO reports that since the third quarter of 2022 the economy has been weak, with a cyclical change of just one tenth of a point on the average of the six quarters; the increase compared to pre-Covid levels is greater in Italy, compared to Germany and France.
Recent sector indicators outline a deconomic dynamics still weak, in the face of marked sectoral differences: industry contracts, the tertiary sector holds up and construction recovers quickly in the final months of 2023.uncertainty for families and businesses, detected by the PBO indicator, marked a marked increase in the final part of last year.
