2019 is a year characterized by a progressive slowdown of the global economy. This is once again confirmed by the latest report by the REF Ricerche study centre, according to which even the most recent indicators highlight a phase of moderate growth for the final phase of the year. A dominant factor explaining the recent slowdown has not yet been identified, how much a set of causes, from the tariff wars, to Brexit, to the numerous outbreaks of crisis that have affected various countries: Argentina, Venezuela, Turkey, Iran to mention the main ones.
To the hypothesis of the superimposition of a sequence of adverse eventsindependent of each other, however, there is a possible key to understanding that tends to bring tensions around the world back to a common matrix, the emergence of a "political risk", to be understood as an increase in the frequency of economic policy choices "extreme", to which a low probability of realization was attributed in the recent past. In other words, it is the economic policies themselves that constitute the origin of uncertainty, generating instability and therefore an even greater prudence of companies in investments.
Ultimately, according to REF Ricerche, the result is a reduction in the growth rate of the world economy and also in its potential, thus accentuating the trend towards secular stagnation. There is no shared explanation of the factors that may have led to the new political season. In part, this may be a direct consequence of the social tensions triggered by the 2008-2009 recession and the costs this entailed for segments of the population that were marginalized in the labor market. Many analyzes indicate a reason for change in the different ways of participating in political life through the exchange of information on social networks.
Certainly public opinion is formed now in a different way than before when the information was mainly conveyed by the traditional media and the weight of parties or other bodies such as trade unions was greater. Other analyzes tend instead to trace the change underway to the different socio-economic context on which they are grafted. It is the theme of inequalities and the retreat of the middle classes of Western countries that has occurred over the last three decades. Analyzes of the distribution of household incomes underline how unfavorable growth differentials for the middle classes overlapped with non-exciting performances in terms of average growth rates, to the benefit of households located in the highest income percentiles.
The recurring explanations underline several elements, among which the effects of globalization and changes in technology with the crowding out of some professions and a gradual polarization of the demand for labor to the advantage of workers with extreme qualifications: the more educated and those, frequently workers immigrants, who occupy the lower rungs on the ladder of qualifications. Not by chance the retreat of the middle classes it is often associated with feelings of aversion towards immigrants. If this is the picture, the increase in political uncertainty is not said to be a transitory fact: we will probably see its consequences on the tensions affecting Western societies and on the propensity of companies to invest in the coming years as well.
Until now, the reaction to the scenario of weakening of the international economy has been entrusted to the central banks. The scope for reducing interest rates is limited, also because in several countries rates are now at zero or negative values, and the construction site of unconventional policies needs to be reopened. On the other hand, the effectiveness of monetary policy in a context of low inflation expectations is limited. Furthermore, it is said that a more expansive monetary policy will not be enough in a framework burdened by a fall in entrepreneurs' expectations. It was above all Mario Draghi who underlined in recent months the need not only for a phase of very low interest rates for an extended period, but also for support to demand from budgetary policies.
Countries that have adequate "fiscal space" are called to intervene, i.e. those that have balances in excess of the European targets. In fact, with the exception of Germany, the big economies of the eurozone are out of the game. In any case, the climate has also changed for Italy. This is both because fears of a worsening economic situation are driving Europe to adopt a certain flexibility, and because the collapse in interest rates has helped to revise downwards forecasts for public spending in the coming years. In addition to the fall in international rates, the decrease in the spread also occurred due to the improved ability to coordinate with the European authorities after the change of government.
Budgetary policy aimed at stabilizing the balance, adopting a small-scale manoeuvre. Accused of lack of courage by various commentators, it is however in our opinion wholly acceptable, precisely because it reduces the risk involved in the measures and maximizes the yield from the fall in interest rates. The structure of the maneuver is based on the "deactivation" of the VAT clauses, as well as some other expansionary interventions of limited amounts, partly covered by a deficit (compared to the trend), partly with lower interest expenditure and partly with measures to combat tax evasion, as well as other interventions. Many have highlighted the uncertain nature of the revenue expected from the measures to combat tax evasion, even if the concrete results that have already emerged in 2019 should be underlined on this aspect.
The budgetary policy implemented by the Government is overall neutral, if anything slightly expansive if one looks at the structural primary balance, but it has supported the fall in interest rates and helped to improve internal financial conditions. It is a step forward, but given the still very fragile international context, insufficient to pull the economy out of the pockets of stagnation. 2020 will also be a difficult year.
