(Finance) – The winter economic forecasts just released by the European Commission. This is the theme at the center of the latest Ecopill of theeconomist Andrea Ferretti.
Growth in the Eurozone
“The Commission forecasts Eurozone GDP growth of 0.8% in 2024 and 1.5% in 2025. These are forecasts and – underlines Ferretti – more prudent than those of last autumn but which, however, must be monitored carefully as they are subject to a good deal of uncertainty and this for at least two reasons. The first is that the German economy, fundamental for the Eurozone, is struggling to get back on track. After closing 2023 with a GDP down by 0.3%, even in 2024, according to the Commission, German GDP will not exceed a modest +0.3 percent. Both the drastic reduction in internal consumption and the increase in raw materials in the construction sector have weighed on this figure. Emblematic of the German crisis is the 6-day strike of railway workers, the longest in history. The second reason is that two other countries outside the Eurozone, Great Britain and Japan, have shown clear signs of a slowdown. At the end of 2023, Great Britain entered into recession having recorded two consecutive quarters of negative GDP. The problem is that even the forecasts are not rosy at all.
The Bank of England forecasts, in fact, a GDP growth of a modest 0.2% in 2024 and 0.7% in 2025. Even Japan, despite the ultra-expansionary policies of its government, entered into recession at the end of 2023. Now the problem is that the slowdown of these two economies is capable of slowing down growth in the Eurozone too. In this regard, it is enough to remember that Italy is the second largest exporter to Japan within the European Union and that, again, Italy exports goods worth 25 billion euros to Great Britain on average every year.”
Growth in Italy
“As far as Italy is concerned, the European Commission forecasts that our GDP will grow by 0.7% in 2024. In autumn – he continues Ferretti – there was talk of +0.9%. So certainly modest growth but substantially in line with the Eurozone average so nothing dramatic. However, even in this case our public accounts must be monitored with great attention. In the Budget Update Note (NADEF) we forecast a substantially flat debt relief trajectory with a debt-to-GDP ratio of 140.2% in 2023 and 140.1% in 2024. The little problem is that this trajectory was based on a growth forecast of 1.2%. If the Commission is right in predicting an increase of 0.7%, it is very likely that the downward trajectory of the debt will be interrupted. And since we will soon have to deal with the European Commission precisely on our debt in the context of the new Stability Pact, two factors become essential: no concession to pre-election cheerful finance and timely grounding of the Pnrr to support the recovery and our SMEs.
(Photo: Mika Baumeister on Unsplash)