Confindustria and the alarm on Italy: “In 2023 a growth of 0.4%”. There is the uncertainty of interest rates and consumption remains unchanged

MILAN. On the one hand, the slowdown in gas prices, which is still not enough to bring down inflation. On the other, the surge in interest rates, the largest and fastest since 1999: +3.5 points in nine months, a record. Italian companies are grappling with a complicated “international scenario”, but Confindustria dismisses the specter of a major slowdown. According to the forecasts of the Centro Studi di Viale dell’Astronomia, “the trend of GDP in 2023 (+0.4%) is markedly slowing down compared to the 2022 average. But more favorable than assumed just a few months ago, when foresaw a zero annual change in the Italian economy” write the technicians. In 2024, on the other hand, thanks to the return of the price race, to the less restrictive monetary policy and to the improvement in the international context, “there will be a better dynamic” also in our country. A step forward of 1.2 percent.

The upward revision for 2023 compared to the CSC scenario of last Octoberand, “is entirely explained by the better than expected performance in the second half of 2022, despite the energy shock: this has raised the positive legacy left to the new year’s GDP. In particular, in the 4th quarter of 2022 Italy limited the downward adjustment to a minimum”.

The path of GDP, however, is not straight, warn from Viale dell’Astronomia: “It is estimated – explains the report – that the Italian economy still suffered a slight contraction in the 1st quarter of 2023, mainly due to the delayed effects of the consumption inflation and a pause in investments after the jump at the end of 2022. From the second half of 2023, the easing of inflationary pressures and a filing of interest rates should favor a positive dynamics of the GDP until the end of 2024. A moderate growth profile, but slightly higher than the pre-crisis average thanks to the first positive effects of investments and reforms of the PNRR on the expansion potential of our economy”.

Italian household consumption will remain almost stationary on average in 2023 (+0.2%), below the inherited drag thanks to the good dynamics in the central part of 2022. Year in which real disposable income limited the damage, despite the jump in inflation and a large part of the expendable extra savings was used, leaving few resources until 2023. This year, moreover, the highest rates for home loans and consumer credit will play against spending on goods and services. Only later, in the wake of the slow decline in inflation and, therefore, of

a recovery of real income, consumption will return to growth, from the second half of 2023 and, with more momentum, in 2024.

Total investments are also expected to grow slightly. The reasons are the withdrawal of tax breaks in the construction sector and the impact of more stringent financing conditions. The annual figure hides, as for consumption, a very weak start in 2023 and a subsequent recovery, which will then continue more quickly in 2024. But the pace will remain far below the great vivacity recorded in 2022, linked precisely to the investment boom in construction.

In the CSC scenario, both Italian exports of goods and services and imports, after the strong expansion in 2022, will not escape the general slowdown in 2023. Which is due, for foreign flows, above all to the weakening of the international context. And 2024 will go only slightly better, returning to the average growth rate of the pre-Covid period.

Returning to GDP, explains the CSC, “the Italian economy will record a contraction in the 1st quarter of 2023, slightly more extensive than that of the end of 2022. This is due to the delayed effects of inflation on consumption and an expected drop in investments after the leap in the 4th quarter also linked to the first impacts of rate hikes. Furthermore, in aggregate, the boost linked to the gap to be filled with respect to the pre-Covid level has now exhausted, although household spending has not yet returned to the value of 2019. In the 2nd quarter of 2023, on the other hand, a statistical rebound”. Starting from the 3rd quarter of the current year, says Viale dell’Astronomia, “inflationary pressures should begin to ease further, following the already observable normalization of energy prices and many commodities. Even if the effects of the rate hikes unfold in full, the intensification of productive activity would be necessary even if only to rebuild the stocks eroded last year. This would favor a positive trend in GDP until the end of the forecast horizon, in 2024. With a moderate profile, but higher than the pre-crisis historical average, also thanks to the positive effects of investments and the reforms of the PNRR. Also this year a positive contribution to growth from net exports is not expected since both the dynamics of exports and imports are expected to slow down”.

The CSC identifies three risks. First of all, monetary policy and its impacts. “If the rate hike in the Eurozone turns out to be incorrectly calibrated (too premature, too broad), it could curb economic growth, to a greater extent than what is already incorporated in the scenario”. Then, the analysts continue, it must be “considered that rate hikes of such intensity and speed, such as those implemented by the European Central Bank, increase the risk of financial instability in the monetary union also due to its incomplete definition and delays in implementation of the banking and capital market union. These risks could translate into asymmetric increases in government bond yields, especially Italian ones, with negative consequences on the cost of public debt and on the cost of credit, which have been excluded from the scenario”. And again: “The unprecedented increase in official rates by a very large number of central banks in the world increases the risk of financial instability at a global level. These can materialize in balance of payments crises for some countries or default of some financial institutions which could have negative repercussions at an international level”. Finally, there is the unknown energy. “Consumer price dynamics, after the strong surge in 2022, seem to have passed the maximum peak and embarked on a gradual downward path – reads the study – However, inflation could take on a more persistent profile than imagined, especially if there were new flare-ups in the price of gas, which are excluded from the scenario”.