For Brussels, Italy’s GDP grows by 1.2 percent. Gentiloni: “The contribution of the Pnrr is fundamental”

The European Union’s economy has weathered the effects of Russia’s war on Ukraine better than expected and is heading towards a return to normalcy, including Italy’s traditional low growth rates, according to the released spring economic forecasts by the Commission today. “The European economy continues to demonstrate resilience in a difficult global context”, explained the EU executive. Growth estimates have been revised up from the winter forecast, for both the EU and the eurozone. In 2023, GDP is expected to grow by 1 and 1.1 percent respectively, in 2024 by 1.7 and 1.6 percent. Fears of a recession in late 2022 have been overcome thanks to lower energy prices, fewer bottlenecks in supply chains and a strong job market. Early 2023 data is better than expected. “The European economy has managed to contain the adverse impact of Russia’s war of aggression against Ukraine, overcoming the energy crisis thanks to a rapid diversification of supplies and a considerable decrease in gas consumption”, explained the Commission.

Member states’ public finances are also improving rapidly, after the debts accumulated during the pandemic and the support measures for households and businesses to lighten the impact of the increase in energy prices. Both in the EU and in the euro area, deficit and GDP are falling at a rapid pace. The aggregate deficit of the public accounts is expected to go from 3.4 per cent in 2022 to 2.4 per cent in 2024, according to Commission estimates. Public debt will fall below 83 percent next year (90 percent for the eurozone). The main problem for the EU and the eurozone remains inflation. Although the peak was recorded in 2022, estimates of price increases have been revised upwards. For 2023, the Commission forecasts average inflation of 5.8 per cent in the euro area, before declining to 2.8 per cent in 2024.

For Italy too, the Commission’s estimates show a return to normality. But not necessarily in a positive way. “Production growth back to trend” is the title of one of the paragraphs dedicated to Italy in the forecasts. After a deceleration in the second half of 2022 and a rebound in the first quarter of 2023, GDP is expected to “return to more modest growth” until the end of 2024. Last year, GDP grew by 3.7 percent. In 2023 and 2024, growth is estimated at 1.2 and 1.1 percent. According to estimates, next year Italy should return to being the last economy in the euro area in terms of GDP growth. By contrast, Italy will remain the second country with the highest public debt, with an estimated 140.4 per cent of GDP for 2023 and 140.3 per cent for 2024. The Commission estimates that the deficit, which it was 8.0 percent in 2022, will drop to 4.5 percent this year and 3.7 percent next. Commission’s structural adjustment forecasts indicate that Italy would be broadly on track with its proposed revision of the Stability and Growth Pact. However, the Commission’s forecasts do not include the tax cut announced by the government in the Economic and Financial Document (Def), because the measures are not sufficiently specified.

For Italy’s growth “the contribution of the Pnrr is fundamental”, warned the commissioner for economic affairs, Paolo Gentiloni. The contribution of the Recovery Fund in the three-year period 2022-24 is equal to 2.5 percent. “It is very consistent”, but the objectives of the Pnrr must be “respected” to obtain disbursements according to the scheduled schedule, Gentiloni said. “At a time when the margins for expansive policies to fight inflation are reduced, having an instrument like the Pnrr available for expenses and above all for future-oriented investments is an extraordinary opportunity” and “Italy must do every effort,” Gentiloni said.