Despite the critical issues, the Italian economy is holding up the shot. This is what emerges from the 49th Quarterly Observatory on Italian economic data elaborated by Mazziero Research which analyzes various aspects of the Italian economy, which despite everything is proving to be more resilient than previously assumed.
In this perspective, the Italian industrial production does not appear to have been affected much by inflation and by the increase in rates by the European Central Bank, with GDP closing 2022 at +3.7%, while the balance of the extra-EU trade balance has now returned to positive for three months.
All of this employment also benefits with 118,000 new jobs in the 4th quarter of 2022 to which are added another 35,000 units in January alone.
“The sore points are always and only on the side of debtwhere we note a dynamic that will exceed 2,800 billion in the first quarter“, comments Maurizio Mazziero, according to whom we also need to carefully monitor the interest expense which, after a leap of 20 billion in 2022, could continue its upward run.
Public debt remains high
Also for 2022 the increase of public debt has remained at high levels and well above the historical average. If in 2020 and 2021 the sharp increase in public spending concerned action to combat the pandemic and support measures for businesses and households, 2022 mainly originates from therising energy prices.
However, the good growth of the GDP allowed to show a nonetheless contraction in the debt-to-GDP ratio, a dynamic that may prove more difficult to achieve in 2023 due to slowing growth and higher interest payments. The deficit/GDP ratio also fallsalthough much higher than expected by the Government (5.1% against the current 8.0%).
The graph above shows the official values of the public debt with the red line, while the gray lines represent the estimates up to June 2023 elaborated by Mazziero Research.
After the publication of the debt at the end of 2022 at 2,762 billion, now public debt could experience a sharp acceleration in the first half of 2023thus moving into one range between 2.828 and 2.865 billion in June.
GDP seen at +0.7% in 2023
The table below shows Mazziero Research’s estimates of GDP for the entire year 2023 and for individual quarters.
After the slight decline in the 4th quarter, we estimate a slight one recovery to +0.1% in the 1st quarterwhich should also continue in 2nd and 3rd quarters with a +0.2% and show up flat in the last quarter.
On an annual basis, thanks to a growth acquired from 2022 of +0.4%, there would be a 0.7% GDP increase.
Tax revenues: the increase continues
The trend of increasing tax revenues is confirmed. In 2022, the state has collected in direct taxes (Irpef, Ires and substitutes) almost 24 billion more than the previous year and over 20 billion more in indirect taxes. The only item that sees a contraction is that of taxes on mineral oils, with a decrease of almost 5 billion due to the reduction in excise duties.
However, the gap between income and expenditure remains large (chart below), even if Mazziero points out that “the situation is undoubtedly improving compared to the terrible years linked to the pandemic (2020-2021), but still very far from a condition of normality”.
Government bond yields stabilize
The graph below shows the evolution of average government bond yields. In detail, the typical rate (yellow line) indicates the weighted average yield by type of issue. As can be seen, after the strong increases, BTPs and CCTs have stabilized, while i BOTs are still in the growing phase.
Didn’t wait for theimpact on interest expense which highlights a increase of almost 20 billion in 2022 compared to the previous year. From this point of view, Maurizio Mazziero warns that “this spending is set to grow more and more in the coming years, even if yields do not undergo further increases, given that as older government bonds mature, new issues will match the higher yields”.
Ratings remain unchanged
As Maurizio Mazziero points out, “Moody’s repents and brings growth estimates for Italy back to positive”.
However, there are no big news on the rating front, “the only agency that should have presented a judgment (Scope ratings) folded, not carrying out any evaluation. Good look, since on that front “no news” equivale a “good news”.
The theme of the rating, at the moment, seems to have lost interest, in an economy that overall holds. Furthermore, there is a certain distraction in the increase in debt which, also following the revisions linked to the accounting treatments of credits (building bonuses), have significantly worsened the dynamics of the public finances.
Moody’showever, has recently revised Italy’s growth positively by bringing its own estimate for 2023 from -1.4% to +0.3%.
