Who would have thought it just a few months ago when dark clouds were forecast for 2023 for GDP and inflation. Today the European Commission, as several other studies had already begun to do, confirms that 2023 will have good weather, with good results and more moderate inflation winds.
Today 13 February the Commissioner Paolo Gentiloni in presenting the Winter 2023 Economic Forecasts effectively deleted from his speech the term “recession” and looped a series of data with the plus sign, both for Italy, Both for the the euro area.
" good news is that the EU economy has entered this year at a better pace than expected and appears able to escape the recessionGentiloni said. And he adds that even in Italy, with the expected recovery this year "a technical recession would be avoided". “We have to keep the same direction”, concludes Gentiloni, “but now we have more solid foundations for 2023”.
Italy will remain expanding, on average for the euro area
On the Italian side, Brussels expects an expansion of the economy 0,8% in 2023, with a sharp increase compared to the November forecast which was limited to +0,3%. for thenext year estimates confirm growth of 1,0%.
The figure for 2023 partly aligns with that of the government which it had estimated in Nadef a growth of 0,6%. The data from the European Commission also match those recently released by other institutions. At the end of January, for example, the Bank of Italy updated its forecasts for the Italian economy by adjusting them upwards: +0,6% of GDP for 2023, while it confirmed the estimate of +1,2% for both 2024 and 2025. In the same days, also The Monetary Fund brought growth for 0,6 to 2023% - in line with the government -, setting that for next year at 0,9%. In the first case, it was a major upward revision given that a recession in 2023 was expected until the autumn. Berlaymont Palace, headquarters of the European Commission, remains cautious about our country because "this year economic activity should only gradually resume". And the fears concern the “household consumption who continue to be held back by the loss of purchasing power wages, also due to the end of the tax breaks on motor fuels (at the end of 2022) and other support measures".
THEinflation in Italy it is forecast at 6,1% this year, already down from 8,7% last year, while in 2024 we could revise 2,6%, very close to the ECB's target of 2%.
Eurozone: the EU raises its GDP estimate to +0,9% for 2023, +2024% in 1,5
Commission raises growth estimates for this year 0,9% even in the euro area (therefore just 0,1% more than to Italy) after +3,5% in 2022, and at 0,8% in the EU. Previous estimates were at +0,6% and 0,5% respectively. Both areas are now set to narrowly avoid the technical recession that was predicted for the end of the year, reports the European executive. The expectation of growth in 2024 it is 1,5% in the eurozone and 1,6% in the EU. “The European economy has done better than expected, despite the shock caused by the Russian war in Ukraine” explained Gentiloni. “We started 2023 better than expected”. The European economy could avoid a contraction in first quarter, after also avoiding it in the fourth quarter of last year. The reasons are a drop in the price of the gas, a recovery of confidence and a market hold of work, explains the EU executive.
EU Commission: inflation estimates revised downwards
Of course, the situation on the price front is still a bit difficult for this year, but better than before and with a still downward trend. “Inflation will reduce grip on purchasing power only gradually over the next few quarters” observes Gentiloni. The European Commission has reduced its inflation projections, expected to 5,6% in 2023 for the eurozone and 6,4% in the EU. In 2024, expectations are +2,5% in the euro area and +2,8% in the EU. In the previous autumn economic forecasts, inflation was expected at 6,1% in the euro area (7% in the EU) in 2023 and 2,6% in 2024 (3% in the EU).
La European Central Bank has already announced new increases in the cost of money in the coming months, compared to the current reference rate of 3% in order to be able to bring prices back to its target of 2%. The decline is mainly due to price developments on the energy market, explain the economists of the European Commission. “Although the uncertainty surrounding the forecasts remains high, the risks for growth are substantially balanced”, concludes the EU executive. “Domestic demand could turn out to be stronger than expected if recent wholesale gas price falls have a larger impact on prices and consumption proves more resilient. However, a potential turnaround in the context of ongoing geopolitical tensions cannot be ruled out.
The price peak is behind us
“HICP (harmonised index of consumer prices) inflation” says a release, “has increased significantly in 2022, fueled by the sharp increase in energy prices. It is estimated that it has peaked in the fourth quarter, with an average of 8,7% over the whole year. While international energy commodity prices have mostly fallen to 2021 levels, their increase has spread to producer and retail prices of food, industrial goods and eventually services. The increase in inflation in the second half of 2022 will carry over into 2023, but base effects are expected to help reduce the annual rate to 6,1%.
Sweden among the countries most in difficulty, but Germany is also at the bottom of the ranking
Among the European countries in difficulty, the Sweden which will record a -0.8% of GDP in 2023. And to a certain extent also the Germany which will score a skimpy 0,2. Even if the previous autumn forecast even assigned it a -0,6% and therefore in reality it jumps by 0,8%. There France, however, improves the growth estimate from 0,4 to 0,6 percent for this year. The most dynamic countries, on the other hand, will be Ireland with +4,9 per cent and Malta with +3,1.
