MILAN – Italy risks returning to zero growth already this year. This is the hypothesis formulated by the Bank of Italy in the event of a further exclusion of the war in Ukraine with a stop of supplies already in the summer and further increases in the prices of goods. A shock that would lead to zero growth for 2022 and a drop to -1% in 2023. Consumer inflation “would undergo a sharp increase in 2022, approaching 8 percent, and remain high in 2023 as well, at 5.5 percent, only to drop significantly in 2024 “. However, even in the basic scenario, Via Nazionale has fine-tuned its forecasts. GDP growth in Italy would be 2.6% this year, 1.6% in 2023 and 1.8% in 2024. In January, the forecast was for growth of + 3.8% in 2022, 2.5 in 2023 and 1.7 in 2024.
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“The base scenario described is heavily dependent on the hypotheses on the evolution of the conflict in Ukraine. An intensification of hostilities – we read – would have heavier repercussions than those incorporated in the base scenario, especially if the supplies of energy inputs from Russia. In an adverse scenario characterized by a stoppage of supplies starting from the summer quarter, only partially compensated for our country by other sources, direct repercussions are assumed from this interruption, in particular for manufacturing activities high energy intensity, further substantial increases in the prices of raw materials, a more decisive slowdown in foreign trade, a stronger deterioration in the climate of confidence and an increase in uncertainty “. Under these assumptions, the institute notes, “the product would increase to an almost zero extent on average for the year in 2022, it would decrease by more than 1 percentage point in 2023 and would return to growth in 2024”. The scenario does not include further economic policy measures, which could be introduced – in particular in the adverse case – to mitigate the effects of the worsening of the conflict on families and businesses, the institute specifies.
“Strong brake on growth due to price increases”
Bankitalia then underlines how the increase in prices has contributed significantly to the revision of the estimates. “Compared to the projections published in the January Economic Bulletin – he adds – the growth of the product is clearly more contained in the two-year period 2022-23, due to the strong brake deriving from the increase in consumer prices and uncertainty, and slightly higher in the 2024, when it would benefit from the elimination of the negative effects of the conflict and the reduction of inflationary pressures “.
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