(Finance) – Scope Ratings has revised its growth forecasts for Italy downwards for 2022 to about 2% -2.5% from about 4% before the war. For 2023, the European rating agency estimates growth of around 1.5% -2%. Consequently, Italy it will only reach pre-pandemic GDP in the fourth quarter of this year, about six to nine months later than originally expected. It is emphasized that a growth of 2% -2.5% for this year implies an average quarterly growth of 0% for the rest of the year. Indeed, after the contraction in Italian real GDP of -0.2% in the first quarter of this year, zero growth for the remaining quarters would translate into annual growth of 2.2% given the basic effects.
These projections are based on the absence of gas shortageswhich would otherwise lead the Italian economy to a contraction of 0.5% -1% in 2022 and 2023, while inflation would increase by around 8% in 2022. In this stressful scenario, assuming annual growth of around 1 ‘1% and inflation of around 3% for 2023-26, Italy would experience “the most adverse combination of low growth and high inflation among large advanced economies“, underlines the report, due to” short-term vulnerability to rising energy prices and weak medium-term growth prospects “.
Scope Ratings estimates the potential of medium-term growth of Italy to about 0.8%, “incorporating the projections of the declining working-age population and a modest improvement in productivity”. This compares with the IMF’s medium-term growth estimates of just 0.5%, significantly below the Italian government’s forecasts for medium-term growth of around 1.4%.
“Italy’s growth prospects would be even worse, with the stagflation in 2022-23 as the most likely outcome, were it not for the EU Recovery Fund – reads the analysis – The EU should provide around 70 billion euros, or around 4% of GDP in 2021, for Italy in the period 2022-24 under the Next Generation EU program, equivalent to an increase annual production of about 0.5% of GDP “.