“The surge in energy prices and rampant inflation are showing the bill.” This is how Paolo Gentiloni summarizes the slowdown in the eurozone, including Italy. The Commissioner for Economy presents economic forecasts indicating a general deterioration for 2023, which has in Germany the main alarm bell: the German economy is in recession. The Gross Domestic Product of the leading European economy recorded a -0.6% in 2023, and dragged down the bloc of countries with the single currency. Compared to the July forecasts, the Commission cuts beyond one point of growth: for next year no more 1.4% growth, but 0.3%.
A result that is explained by the continuous rise in energy and raw materials prices, which have fueled inflation. This will almost double next year. The EU executive revises the estimates upwards, taking it from 3.4% to 6.1%. Less growth and more inflation the picture painted in Brussels, moreover in line with the expectations of other bodies such as the European Central Bank and the ECB.
Italy, growth more than halved but debt falls. The deficit node
There is no recession, and that’s the good news. But the climate is one of profound uncertainty and manifest weakness. This also applies to Italy, to which the services of the Directorate General for Economic Affairs cut over half a point of growth. For the next year, GDP at + 0.3% instead of + 0.9%. The country system is not the black jersey for growth performance, but it is still in the last places. Only Germany, Latvia (both seen in recession), Belgium and Finland have smaller growth trajectories.
But Italy has a downward trajectory of debt on its side. The European Commission, compared to the levels of 2022 (144.6% in the ratio with GDP), sees a reduction of one percentage point both in 2023 and in 2024. A figure that helps to give confidence to markets and partners, always attentive to the state of tricolor public finance. The forecast offers optimistic signs about the sustainability of the deficit.
If the debt is expected to decrease, the deficit is instead expected to increase. At the end of this year the ratio with the gross domestic product will be 5.1%, expected to decrease to 3.6% next year. But in 2024, the headline deficit is expected to increase to 4.2% due to lower taxes and more pensions. To the traditional high debt is therefore added the question of the deficit, foreseen well beyond the maximum threshold of 3% envisaged by the common rules, currently suspended, but which is expected to be reactivated shortly.
Future challenges: raw materials but above all gas
For Italy as well as for the eurozone, “the main threat derives from the negative developments in the gas market and the risk of shortages, especially in the winter of 2023-24”, notes the European Commission, whose invitation is to work in this direction . It means real and timely reforms, and targeted interventions for vulnerable families and businesses.
“A strong labor market, combined with reforms and investments in the recovery mechanism, should help support the economy,” suggests the commissioner for an economy serving people, Valdis Dombrovskis. “Continuing with the implementation of the recovery plans mitigate these adverse developments,” echoes Gentiloni. A reminder that seems valid above all for Italy, where the Prime Minister, Giorgia Meloni, would like to reopen and renegotiate with Brussels some of the commitments made by her predecessor Draghi.
The Commission, in its document, argues that in addition to gas supply, “the EU remains directly and indirectly exposed to further shocks on other commodity markets that reverberate due to geopolitical tensions”. But the gas is the real key factor. “In terms of growth,” the main threat derives from the negative developments in the gas market and the risk of shortages, especially in the winter of 2023-24 “.
The pejorative scenario
Beyond the basic forecasts for 2023 and 2024, the community executive services carry out other, hypothetical ones, which consider the scenario of a complete stop of gas flows from Russia, aggravated by insufficient savings on gas consumption and cold winters. It would mean a contraction of “about 0.9 per cent” for the current year compared to the 0.3% published “, and therefore a recession in the eurozone, and growth of only 0.5% in 2024 instead of 1. , 5% Not only that. “Inflation could increase by another 2 percentage points in 2024 compared to our baseline”, acknowledges Gentiloni. Rate at 4.6% instead of 2.6%. All this “if we fail to prepare in advance for a season of high demand ”, says the Italian commissioner, who calls on the Europe of the States to remain united.