What a difference just three months can make. For the prospects of the Italian economy, but also for the narrative that the Meloni government has built around us. Because if in the first quarter of the year GDP had surprised everyone with a jump of six tenths, a European primacy heralded by the premier also in her recent trip to the United States, in the second quarter growth returned to the earth. Or better below: -0.3%, Istat announced yesterday, worse than the forecasts that wanted it flat. A cold shower that transforms Italy from trailing to bringing up the rear among the big names in the eurozone, behind France (+0.5), Spain (+0.4) and Germany in stagnation. And that makes the government’s forecast of a round point of development for the whole of 2023, an estimate that was born prudent, an objective that cannot be taken for granted. “Still current and reachable,” says the Treasury in a note, in much more defensive tones.
Istat, GDP slows down: -0.3% (second quarter). Inflation slows down. The Mef: high rates weigh by Flavio Bini 31 July 2023
Il “little economic miracle” of Italy (again Meloni, a month ago) was in short a rear-view mirror celebration, silenced by a series of uncomfortable truths contained in the new numbers. The first is that between 2022 and early 2023 much of the growth was the effect of the Superbonus, a push that failed after the decision to limit the exorbitant building incentive. The second is that industry, the linchpin of Italian resilience, is slowing down sharply, pinned down by German weakness and the increase in interest rates, which are leading companies to reduce inventories and investments. The third is that services and consumption are holding up, but alone they were not enough to support domestic demand and keep the country expanding.
In a period of great volatility, three months is not a final sentence. According to analysts, the excellent tourist season should be enough, in this summer quarter, to bring GDP back to parity or slightly above, avoiding the technical recession. But the below-expected data returns the country to its normality, which for the next few months means stagnation, with substantial downside risks. Also because in the meantime news is coming that is darker than clear, even from inflation. In July in Italy the price race continues to slow down, slowing down to a +6% that has not been seen since April 2022, but with peaks that remain over 10% in the cart. While at the European level it proves to be stubborn, stable in the core component, which excludes the most volatile assets, and even rising in services. These are the indicators that most influence the ECB and therefore make another rate hike in September more probable, with consequent depressive effects.
We therefore return to 1%, the government’s minimum target. Which after this slowdown is moving away: if after the first quarter the treasure of growth already acquired for 2023 was 0.9%, one step away from the goal, it has now fallen back to 0.8. It will be necessary to rediscover at least a little development to achieve it. Analysts’ estimates fluctuate between +1.3% for Bank of Italy and the pessimistic +0.7 for Barclays. Half a point of GDP through which passes a large portion of the margins – financial and political – of the next budget law. With the monetary tightening which has yet to fully account, and without other expansive factors, the prospects of achieving the objective, but also of not remaining the European rear bringer in 2024, are linked to the Pnrr: «The game is played out almost entirely there,” he says Stefania Tomasini, senior partner of Prometeia responsible for forecasting the Italian economy. «The machine has been slowed down pending the revision of the Plan. Now the government’s proposal has arrived, but it is still early to understand when and with what intensity it can start».
Then there are the families, grappling with inflation which – albeit declining – erodes wages and purchasing power. In the last months the expansion of employment, from construction downwards, has been a lifesaver that has allowed many to cushion the price increases. But the slowdown could soon also be reflected in employment: “It is possible that employment will slow down – says Tomasini – in the recruitment intentions of companies we are beginning to see some sagging, a figure to be followed carefully”.