A 2,4% drop in GDP, a million and a half more unemployed in 2013, a manufacturing industry that feels the effects of the crisis as if it were a war. This is the bleak picture of Italy drawn today by the Confindustria study centre. Italy "is in the abyss" and the economic recovery appears to be more distant than expected. “We are not at war. But the economic damages caused so far by the crisis are equivalent to those of a conflict", declared the CSC, “the most vital and precious parts of the Italian system were hit: the manufacturing industry and the younger generations. Those on which the future of the country depends”.
GDP – The expectations of the CSC on the growth of the Italian economy worsen. In fact, the Study Center draws up a drop in GDP of 2,4% in 2012, against the -1,6% previously expected. In 2013 the decline will be less steep but still worse than previously estimated: – 0,3% against +0,6%.
UNEMPLOYMENT – 2013 will end with almost one and a half million (1 million 482 thousand) fewer employed persons than at the beginning of 2008 (-5,9%). Unemployment "continues the trend observed in recent months". This year the unemployment rate will reach 10,4%, in 2013 it will reach 11,8%, reaching a maximum in the fourth quarter of 2013 at 12,4% – without counting the workers in the Redundancy Fund.
INFLATION AND CONSUMPTION – Inflation continues to rise as consumption plunges into free fall. According to the economists of Confindustria, inflation will increase to 2012% in 3,1 and then fall to 2,6% in 2013. While families, grappling with the "past and expected drop in disposable income", drastically reduce their spending : consumption falls by 2,8% this year and by 0,8% in 2013 (much lower than the December estimates: -1% and +0,4%).
TAX PRESSURE AND SPENDING REVIEW – The CsC warns that if the VAT increase were to start in October, the tax burden would skyrocket. If it were to occur in 2013 “the apparent tax burden will rise to 45,4% of GDP; the effective one, which takes into account undeclared work, will reach 54,6%”. However, the effects of replacing the VAT increase with the savings obtained from the spending review will have positive effects: the CSC estimates that the GDP in 2013 would be 0,24% higher, consumption by 0,67% and investments by 0,51%, with 27 thousand more employed.
PUBLIC DEBT AND DEFICIT – The CsC confirms the words of Prime Minister Mario Monti, declaring that the Italian public finances are "significantly improving". However, the greater decline in GDP "inevitably pushes the balance away". In 2013, the CSC estimates a net debt/GDP ratio of 1,6%. However, the primary balance will reach 4,3% of GDP in 2013, "a value with few equals in the Eurozone and in the advanced world". However, from 2013 the public debt will stabilize in relation to GDP at much higher levels than those predicted in December by the economists of Confindustria: 125,8% compared to 121,3%.
SOLUTIONS FROM ITALY… – To bring the country back on "a high path of development", it must be freed from the "lead of bureaucracy" which is a "boulder" for Italian companies with administrative costs that "weigh more than 26 billion a year". According to CSC estimates, a 1% decrease in public administration inefficiency is associated with a 0,9% increase in the level of per capita GDP and a 0,2 percentage point increase in the share of employees in joint ventures on total non-agricultural private employment. The inefficiency of the Public Administration "pervades every social and economic sphere" and this constitutes "a serious obstacle to the well-being of citizens and to the development of businesses, discourages investments, both Italian and from abroad, places Italy in the last places in almost every international ranking of competitiveness and alienates talents”. The bureaucracy represents
… AND FROM THE EU COUNCIL – The outcome of today's and tomorrow's European Councils “is crucial” for the fate of the European Union. The CsC calls for “measures to halt and reverse the long-standing credit disunity which is causing a violent credit crunch precisely in the countries most engaged in the effort to correct public finances. Swift concrete actions are needed to eradicate the embryos of monetary disintegration that have already materialized through the segmentation of banking systems and the enormous difference in interest rates”.
Download the study by the Confindustria Study Centre
Attachments: Economic scenarios_CSC_0612.pdf
