Italy may already suffer a “mild” economic recession, according to data released by the Bank of Italy and a leading business organisation, though both said the economy would strengthen over the second half of this year.
The two reports were the first major economic forecasts for the country released this year on Friday.
According to the forecast from retailers’ association Confcommercio, a slowdown in household demand due to rising prices sparked by the Ukraine conflict appears to have created what the organisation called a “short and mild … recessionary” period.
A recession is generally defined as two consecutive quarters of negative economic growth. Though Italy’s economy is likely to show positive growth for 2022 as a whole, indications are that the economy contracted in the fourth quarter of 2022, Xinhua news agency reported.
In Friday’s report, Confcommercio said that the negative trend appeared to be extending into the first quarter of this year.
The Bank of Italy said that high prices, a restrictive monetary policy of the European Central Bank (ECB) and a global economic slowdown would likely hinder growth prospects in Italy and the rest of the EU.
In Friday’s statement, the Bank of Italy added the Italian economy “weakened” in the last quarter of 2022, noting that companies interviewed by the Bank of Italy surveys “still consider the conditions for investing unfavourable”.
Both Confcommercio and the Bank of Italy pointed to rising prices pushed higher by energy costs as a major drag on economic growth. According to ISTAT, Italy’s National Institute of Statistics, prices in 2022 rose 8.1 per cent year-on-year and ended the year with double-digit inflation in the last three months.
In its research, Confcommercio said prices would rise by “at least” 6 per cent in 2023, further dampening growth prospects.
In its forecast, the Bank of Italy predicted a 0.6 per cent growth for 2023, far weaker than its last year’s estimate of a 3.9 per cent expansion, but still higher than the forecasts of 0.4 per cent in December and 0.3 per cent in October.
But the Bank of Italy also warned that the economy could contract by as much as 1 per cent this year in what it called an “adverse scenario” that involved Russia cutting off energy supplies completely to Italy.