The recession in Italy will continue in the first half of 2013. After the heavy -3,7% recorded in the last quarter of 2012, the OECD has forecast for the peninsula a cyclical downturn of 1,6% in the first three months of this year and down another 1% in the second quarter.
This is the worst estimate of all those contained in the Interim Assessment published today: +2,4% in the first quarter and +1,8% in the second is estimated for the entire OECD area. Together with Italy, the French economy will also contract in the first three months of the year (-0,6%), which should however return to growth by +0,5% in the second quarter. With the exception of Italy, no other G7 economy will register declines in the second quarter.
In the Old Continent Germany is doing much better, for which the OECD has estimated growth of 2,3% and 2,6% respectively in the first two quarters of this year. In the euro area we are thus witnessing a renewed divergence between growth in Germany, which is expected to recover strongly in the first quarters of 2013, and that of other countries, which will remain slow or negative.
The Paris organization praised the structural reforms launched in countries such as Italy, Greece, Ireland, Portugal and Spain which "provide a solid basis for a recovery of competitiveness and for an increase in employment once the demand has returned". And he noted that the rebalancing of the euro area economy is proceeding quickly despite growth continuing to disappoint.
"Considerable progress has been made in reducing structural budget deficits, and in most of the member countries of the Eurozone most of the fiscal adjustment required after the crisis has already been completed", noted the organization, specifying that however the short-term costs of these adjustments could be reduced by a better supply of credit in debtor countries and by structural reforms that help rebalance activity and demand in surplus economies.
Less positive is the vision referring to the labor market in the euro area, which continues to deteriorate contributing to depress consumer confidence and increase poverty and inequality. As a result, the organization called on the ECB to act more decisively to lift the Eurozone out of recession, where the transmission mechanisms of monetary policy are not working.
“In view of the low risks of a rise in inflation,” said the OECD, “Frankfurt could further lower borrowing costs, further expand quantitative easing and link interest rate interventions to precise economic targets, as it is doing the Federal Reserve". Monetary policy is in fact a key tool to support demand, given the limited room for fiscal maneuver in most euro area countries.
Looking globally, in the first few months of the year economic activity is showing signs of recovery in many major economies: the United States shines, with expected growth of 3,5% in the first quarter and 2% in the second , and Japan, which will score respectively +3,2% and +2,2%. Instead, more moderate growth for the United Kingdom (+0,5% in the first quarter and +1,4% in the second) and Canada (+1,1% in the first quarter and +1,9% in the second).
Thus, while the recovery will be slower in Europe, growth in emerging economies remains on average much faster than in advanced countries (with China appearing destined for a GDP increase of more than 8% in the first half of the year) and it will be precisely them to drive the global recovery, given their increased contribution to global economic activity.
Meanwhile, the Italian government must find a way with the European Commission to arrive at the payment of the public administration's arrears, otherwise there is the risk of putting the healthy part of the country's economy into suffering. This was stated by the chief economist of the OECD Pier Carlo Padoan, in the press conference for the presentation of the 'Interim Assessment' on the G7 countries.
“The mass of debts still to be paid with private companies is enormous. If that money isn't paid to businesses, the healthy part of the economy will suffer for the wrong reasons,” Padoan explains. At the European level there are still differences on the Italian government's plan to repay 40 billion of public administration debt arrears without blowing up the public finances targets.
