© Reuters.
By Alessandro Albano
Investing.com – The European economy has performed better than expected, with a smaller-than-expected contraction in the last quarter of 2022 and positive growth in the first quarter of 2023, according to the EU Commission in the latest projections published on Monday, where the growth estimates for 2023 have been revised with some caution and “marginally” for 2024.
For the Eurozone, GDP has been raised to 1.1% for this year and 1.6% for next 2024, a revision of 0.1% for both years.
However, inflation estimates are also increasing, expected at 5.8% in 2023 and 2.8% in 2024, respectively 0.2% and 0.3% more than the estimates published in February in the Winter forecast.
In general, he explained Valdis Dombrovskisformer Latvian prime minister and executive vice president, “the EU economy is holding up very well to Russia’s aggression against Ukraine, which has led to an update of growth forecasts for 2023. However, there are many risk factors to watch: core inflation remains persistently high, which could erode citizens’ purchasing power, slow investment growth and hamper access to credit.To keep inflation under control, it is crucial ensure that fiscal policy remains prudent and maintain the momentum of reforms and investment”.
As for Italy, the Commission expects real GDP growth to slow to 1.2% in 2023 and 1.1% in 2024, with rising prices “holding back private consumption while investment , supported by government measures, continue to expand vigorously.”
The inflation rate is estimated to decrease to 6.1% this year, thanks to falling energy prices, and to 2.9% in 2024.
Looking at the deficit, the public indicator is expected to fall to 4.5% of GDP in 2023, thanks to the “partial elimination of energy support measures”, and reach 3.7% next year.
“The complete elimination of energy support measures and the reduction of expenditure for intermediate consumption more than compensate for the increase in pension expenditure”, explains the Commission in a note.
Conversely, interest expenditure should increase slightly, reaching 4.1% of GDP, even if the projection, it is explained, “does not take into account potential tax cuts, widely indicated in Italy’s Stability Program but not yet sufficiently specified”.
“The risks (to the economy) remain too numerous,” he said Paul Gentiloni, former Italian premier and now commissioner for the economy – and Russia’s brutal invasion of Ukraine continues to cast a shadow of uncertainty over the outlook. We must remain vigilant and ready to respond to any future shocks with the same unity and determination that has allowed us to weather these past three stormy years.”