“In the absence of additional measures in the forthcoming Def, the Government will most likely miss its 2019 fiscal targets. This will turn into new tensions on the markets: the Italian debt will return to the eye of the storm and would seriously risk a new downgrade by the rating agencies”. This is the scenario illustrated by Nicola Nobile, Lead Economist of Oxford Economics, in recounting the global economic forecasts, with a focus on the Italian economy, drawn up by the analysis company and presented together with Assolombarda in Milan: "The Italian debt risks becoming junk by 2019, with all the consequences of the case, starting with the obligation for many funds to sell the securities held, due to internal regulations, until you get to the exit from the Qe, while banks could no longer use government bonds as collateral to obtain liquidity from the Eurosystem”.
A merciless verdict, which in the meantime confirms the recession scenario for the whole of 2019: Oxford Economics estimates a -0,1%, with a slight recovery only in 2020 and 2021, but still lower than the percentage point of growth and the average of the others Countries of the European Union: "The structural gap with our European partners will remain in the next few years, especially in terms of productivity, innovation and budgetary policies". After all, Italy is among those countries that do not have room for more expansionary budgetary policies, as well as France and even unlike Greece, which thanks to the efforts of recent years, tightened by the troika, will have some jokers to spend in the second half of the year to try to revive the economy. But Greece is not the only country in the Mediterranean area to have more margins than Italy. The Oxford Economics analysis also recalls how the spread with Spain and Portugal, which until 2016 was in our favor (in the case of the Lusitanians even by more than 200 basis points), is now reversed and in 2019 it will be around 100 basis points at disfavor towards both the Bonos and the Ots.
"The country - explains Nobile - is substantially mired in a 'bad equilibrium' of four factors, which are low growth, relatively high rates on BTPs, the deficit and public debt that are not decreasing and the little room for policy budget. This last aspect also it will lead to problems in the already fragile coalition government: for example, it will be impossible to implement new measures such as the flat tax, with the risk of political tensions which would make forecasts even more uncertain”. Meanwhile, there are no positive signals even from the labor market, after the expansion of employed persons recorded from 2014 to 2018: they had gone from 22,1 million to 23,3 million, but now even that trend has stopped. Even the PMI confidence index, which at the beginning of 2018 had almost reached 60 points, returned below the 50-point threshold at the end of last year, which is the barrier between the positive climate and the negative climate: it was since 2015 that figure had never dropped below 50 points.
EUROZONE
The Oxford Economics analysis also extended to forecasts for all of Europe, highlighting a situation that is in any case uncertain but of relative optimism: “The Eurozone – argued Andrea Boltho, MoB of Oxford Economics and Professor Emeritus at Magdalene College Oxford University -, thanks to accommodating policies and domestic demand that is buoyant for the moment, it should continue to grow, albeit at a moderate pace“. This despite the sharp drop in confidence in German industry, which is, together with Italy, one of the countries that has slowed down the most and that would be most affected by a possible escalation of protectionist policies: “Uncertainty will be high above all for exporters, such as Germany and Italy, even if we bet on the fact that the Eurozone should benefit in the coming months from a resolution on the Brexit case, an agreement on protectionism and the recovery of the Chinese economy”, Boltho continues.
Just on Germany and the decline of its industry, Oxford Economics has also revealed a curious fact: part of the difficulties were caused the very low rainfall recorded in 2018, especially in the second half and in autumn, well below the average (practically halved). What does this have to do with industry? "The lack of rains caused the dryness of some areas of the Rhine, the river that connects all of Germany and by navigating which most of the industrial transport is carried out", reveals Boltho, who however reassures: "Despite the uncertainty linked to the climatic conditions, data and forecasts say that in 2019 it is returning to rain regularly".
TRADE WAR
Another issue tackled by Oxford Economics and which goes beyond the Eurozone, influencing global economic balances, is that of the possible escalation of protectionist policies. Also in this case, to end up in the crosshairs would be - among others but more than others - Germany, the leading European economy and thermometer of its state: according to the projections presented at the Assolombarda headquarters, in a scenario of moderate protectionism, Berlin would slow down its growth between 2020 and 2021, after a leap that this year would push the German economy from a rate of less than 1% to about 1,5%. In short, in 2021, Germany's growth would be just slightly above 1%, while in the meantime another exporter such as Italy would in any case recover around 0,5% from the current recession.
But what would be a scenario of moderate protectionism? Prof explains it. Boltho: "Duties of 25% from mid-2019 on all Chinese imports, duties of 25% on all imports of cars and components (excluding those from Canada and Mexico), equivalent duties imposed by the EU, Japan etc on American exports of automobiles and components, drop in stock markets and long-term rates, modest appreciation of the dollar”. With this simulation, the losers would be above all the USA and China, but all in all moderately and only until 2020, not in 2021: the delta compared to the "normal" scenario is 0,3 points less than GDP for the US in 2019 and -0,4 in 2020, with China which would instead lose 0,4 and 0,5. For both, the impact on 2021 would be 0, while the Eurozone, Germany and Italy would lose (compared to the "normal" forecast) 0,1 in 2019, 0,2 in 2020 and 0,1 in 2021.
BREXIT – LONG-TERM EFFECTS
“There is still a lot of uncertainty – says Boltho -, we still don't know how it will end: will there be a soft Brexit with the UK confirming the single market? Will there be a hard Brexit according to Theresa May's deal? Or will there be an even tougher Brexit in case of no deal? Whatever the outcome, our studies tell us that the long-term economic cost to the UK will not be huge." In the worst case scenario, in fact, UK GDP in 2030 is estimated at -3,9% compared to today, a forecast shared by the IMF while the OECD is decidedly more negative and sees -7,7% on the horizon. The British government itself is also pessimistic, extending the deadline to 2032 and forecasting a crippling of GDP by 8%.
“In other words – explains the Professor of Oxford Economics – in our opinion, GDP would lose between 0,3 and 0,7% every year, in any case much less than what happened after Lehman Brothers, when the British gross domestic product collapsed by 4,5% in just one year”. For the rest of the European Union, the negative effects would be very limited. Italy for example, between now and 2023 would lose only - overall - 0,4 points of GDP. “The only exception is Ireland. But Ireland, from 2006 to 2015, grew by 25%…”.
