The war extinguishes the recovery of Europe and Italy. Uncertainties weigh a lot, too much. Conflict in Ukraine, energy shocks, tensions between the United States and China, force the European Commission to cut estimates. In 2022, the GDP of the eurozone will register + 2.7% in 2022 and 2.3% in 2023. Compared to the February estimates, a cut of 1.3 and 0.4 percentage points respectively. Same numbers for the EU as a whole. In this context, Italy is also holding back. For the country system, growth is expected at 2.4% at the end of this year and at 1.9% at the end of next. For Italy, estimates of 1.7% and 0.4% compared to what was expected only a few months ago, in February.
If things do not get worse along the way, by the end of this year the country will have had a faster rate of growth than Germany, but still lower than that of France, Spain and the Netherlands. Looking ahead, looking to the next year, Italy ranks in the lowest places in the European ranking in terms of growth performance, 21st out of 27. Among the economies of Euroland, it ranks 15th out of 19 states.
Things are not going well, so much so that the Commission for the first time starts talking about stagflation. They produce a negative scenario, in which the annual growth rates of GDP for 2022 and 2023 are expected to decrease by an additional 1.25 and 0.5 percentage points less, respectively, due to the surge in energy prices. , to the Eurozone growth forecasts for 2022 and 2023. All with inflation expected to be high, over 6% in Europe for this year. If all goes well, inflation could fall next year, but in the meantime Brussels warns states and markets: “The increase in energy prices reinforces the stagflationary forces.”
Italy, public finances under pressure. Little work and impoverished families
War and energy also deflate the Dragons effect. In Italy the economy slows down, as in the rest of Euroland. There is some good news, which the Commission feels it can highlight in a situation made up of some light and just as many, perhaps even more, shadows. There is the issue of debt, which is estimated to decline from 150.8% in relation to GDP in 2021 to the gradual 146.8% in 2023. Good news, even if “it remains at a high level”. Italy will therefore have to continue along the path of fiscal consolidation, with Europe determined to keep the spotlight on.
Then the question of the deficit. Italy closed 2021 at a value equal to 7.2% in relation to GDP, it should drop it to 5.5% this year and again to 4.3% in 2023. However, these numbers are “false”, since they are not updated. The 2022 Stability Law, the Commission technicians reveal, announced further new measures with a net impact of increasing the deficit of about 0.3% of GDP in 2022. “However, they are not included in the forecasts as the details were not available before the deadline ».
But there is also the social fabric that worries Brussels. On the one hand there are fears for the lack of employment, on the other the loss of purchasing power of families. “Despite a significant reduction in the use of working time reduction schemes, the slowdown in the labor market remains considerable,” denounces Brussels. Both hours worked and headcount employment are expected to reach pre-pandemic levels only “by the end of the forecast horizon”, ie end of 2023. The unemployment rate is expected to drop to 8.9% by 2023 , in a context of a growing workforce. Still on the domestic front, the increase in consumer prices, combined with slow wage growth, “is bound to weigh on the real disposable income of households and therefore on the growth in consumer spending”. Domestic demand risks being crushed.
The synthesis is offered by Paolo Gentiloni. “Short-term prospects remain dim, as the war has dented economic sentiment and exacerbated existing obstacles to growth,” says the Economy Commissioner. Italy will have a lot of work to do, therefore.