Economic forecasts Italian automotive technology on display . ( Image : Shutterstock . com .)
According to the European Commission ’ s latest macro-economic forecast for Italy ( 15 May 2024 ), economic growth slowed to 0.9 % in 2023 and is forecast at 0.9 % in 2024 and 1.1 % in 2025 , as governmentsupported residential investment is replaced by RRF-backed capital spending .
“ The fall in energy prices is expected to lead inflation to bottom out at 1.6 % this year , before increasing slightly to 1.9 % in 2025 . The government deficit is projected to drop in 2024 , as the sizeable support to housing renovation is discontinued , and to increase again in 2025 based on unchanged policies . The public debt-to-GDP ratio is set to rise in 2024-2025 due to a less favourable interest-growth differential and the lagged effect of the housing renovation incentives ,” it said .
In 2023 , real GDP grew by 0.9 %, driven by a vigorous expansion in capital spending . This took the form of sizeable tax credits for the energyefficient renovation of residential buildings , which continued to have an impact until the end of the year . Consumption expenditure by both households and the government rose by 1.2 %. Net exports provided a positive contribution to growth , as exports of goods fell slightly less than imports , while trade in services kept increasing at a healthy pace .
“ In 2024 , economic activity is set to expand at the same rate as in the previous year ( 0.9 %). Government incentives to housing investment are projected to unwind , while investment in infrastructure and equipment picks up gradually . Despite the recovery in real disposable incomes , households are set to increase savings , taking advantage of higher interest rates . Annual household consumption is thus expected to remain subdued , also given the drag from the final quarter of 2023 . Net exports are projected to provide a positive contribution to GDP growth ,” added the forecast .
“ In 2025 , private consumption is set to keep benefiting from positive real wage dynamics . Faster implementation of RRF-backed projects is expected to offset the housing investment shortfall . This is set to boost import demand and result in a small negative net export contribution .
The new FIAT 600 Hybrid .
Galleria Vittorio Emanuele II , Milan , Milan , Italy . ( Image : Julia Solonina , Unsplash .)
In 2023 , real GDP grew by 0.9 %, driven by a vigorous expansion in capital spending
Overall , GDP growth is forecast to accelerate slightly to 1.1 %,” it continued .
Total employment rose in 2023 by 1.8 %. The unemployment rate fell in 2023 and is expected to continue declining over the forecast horizon to 7.3 % in 2025 . At the same time , nominal wage growth is set to exceed inflation , as contracts in private services and public administration are eventually renewed , incorporating part of the past price increases .
“ The sharp decrease in energy prices throughout 2023 and early 2024 is expected to abate in the second quarter . A reduction in producer prices has eased pressure across most components of inflation , proving more persistent in labour-intensive services . Thanks to base effects , annual inflation bottomed out below 1 % at the beginning of this year and is projected to pick up moderately going forward , reaching a 1.6 % annual rate in 2024 and 1.9 % in 2025 ,” said the forecast .
In 2023 , the general government deficit fell to 7.4 % of GDP , from 8.6 % in 2022 . The deficit is forecast to drop to 4.4 % of GDP in 2024 , benefiting from the complete phase-out of energy-related measures and from legislative changes to housing tax credits leading to a smaller impact on the deficit . Current revenue is expected to rise along nominal GDP growth , as further cuts to the labour tax wedge are balanced by stronger wage dynamics .
According to the OECD ’ s Economic Outlook ( 2 May 2024 ), Italy ’ s GDP is expected to grow by 0.7 % in 2024 and 1.2 % in 2025 .
“ Real GDP grew by 0.2 % in the fourth quarter of 2023 , supported by strong housing investment before the scaling back of the ‘ Superbonus ’ tax credit at the end of the year , whereas private consumption contracted . Recent high-frequency indicators point to modest growth in the near term . While consumer confidence has improved over the past few months , manufacturing output , retail sales and business sentiment remain weak . Despite the slowdown in growth over 2023 , the unemployment rate remains historically low and collectively negotiated wage growth has picked-up to around 3 %, which should support household incomes and private consumption over the next quarters ,” it said .
Based on its latest baseline forecast , the International Monetary Fund ( IMF ) expects Italy ’ s growth ( 0.9 % last year ) to reduce to 0.7 % this year and 0.7 % next year . n
32 | ismr . net | ISMR June 2024