(Tiper Stock Exchange) – The Bank of Italy has sharply revised upwards the economic growth forecast for the peninsula this year to 1.3%: the expected GDP expansion is, therefore, more than double the +0.6% estimated last January. On the other hand, expectations for the next two years have been revised downwards, to plus 1% over 2024 and plus 1.1% over 2025, while six months ago it forecast plus 1.2% growth for both. Growth is revised upwards in 2023 thanks to a better-than-expected performance in the first quarter, says Bank of Italy in a statement, and downwards in the two-year period 2024-25, mainly due to a sharper deterioration in financial conditions. Expectations on inflation and the labor market are improving.
Last June 7 also the OECD had doubled Italy’s GDP growth forecast on 2023 plus 1.2%, while on 2024 it predicted a plus 1%. These projections were drawn up by Via Nazionale experts as part of the Eurosystem’s coordinated exercise, relating to the entire euro area, announced yesterday by the ECB. They are based on the information available as at 23 May for the formulation of the technical assumptions and as at 31 May for the economic data. A more extensive discussion of the forecast scenario will be presented, as usual, in the Economic Bulletin of the Bank of Italy to be released on 14 July. The scenario presented assumes that the tensions associated with the conflict in Ukraine do not lead to further difficulties in the procurement of raw materials. The macroeconomic picture, on the other hand, is affected by the effects of more restrictive monetary and credit conditions for businesses and households. The scenario incorporates the measures contained in the so-called “Work Decree” and takes into account the interventions financed under the Next Generation Eu programme, based on the most up-to-date information relating to the Pnrr. Inflation forecasts have been eased to 6.1% on average this year, al 2.3% on next year and 2% on 2025.
In January Bankitalia predicted a high cost of living 2023 at 6.5%, on 2024 2.6% and on 2025 at 2%. Expectations on the unemployment rate are also improving: 7.7% both this year and next and 7.6% in 2025. Six months ago, 8.2% was expected this year, 7.9% next, to then drop to 7.6% in 2025. Inflation was revised downwards mainly due to the drop in energy prices, which was faster than assumed in January.
“These projections are surrounded by high uncertainty, with risks to growth mainly oriented to the downside. The conflict in Ukraine remains one of the main factors driving instability, which may lead to further increases in commodity prices and a deterioration in household and companies – warns Bankitalia -. Non-negligible risks are also connected with the evolution of global economic activity, which could be more affected by the effects of the monetary restriction underway in advanced economies, reflected in a lower demand from abroad for goods and Italian services”. The GDP “could also be held back by a stronger tightening of credit supply conditions. The risks for inflation are balanced. Upward pressure could come, in addition to further increases in the prices of raw materials, from the possibility that the transmission of the drop in energy prices to those of other goods and services is significantly slower and less pronounced than the regularities observed in the past. the possibility of a more marked and lasting deterioration in aggregate demand could translate into lower inflation than anticipated”.