Contrary to the Italian government’s claims, the European Commission has stated that Italy will not lead in Eurozone growth. The autumn forecasts presented in Brussels indicate that Italy’s GDP will grow less than the French and Spanish GDPs this year. However, the most concerning news is that in 2024, Italy will be among the countries with the lowest growth in the Eurozone, with a modest estimated increase of 0.9%.
Debt Second Only to Greece
Italy’s economic situation is further complicated by indebtedness, remaining the second-highest in the Eurozone after Greece, with a debt-to-GDP ratio nearing 140%. The Commission has also highlighted that in 2024, the deficit-to-GDP will be 4.4%, slightly higher than Italy’s government estimates. This is the fourth-highest level in the euro area, surpassed only by Belgium, Malta, and Slovakia.
Uncertainties about the Future and Superbonus
Italy’s economic future is even more uncertain due to uncertainties related to Superbonus and the classification of building credits. If Eurostat were to confirm that a portion of these credits was not actually “payable,” Italy might be forced to revise the deficit-to-GDP ratio upward.
GDP Growth Slows: Forecasts for the Future
According to the new estimates from the European executive, in 2023, Italy will see a GDP growth of 0.7%, below the initially projected 0.9%. In 2024, a modest increase to 0.9% is expected, compared to the previous estimate of 0.8%. However, in 2025, despite an alleged recovery bringing GDP to 1.2%, Italy will be last on par with Germany in relative terms.
Rising Inflation, Weak External Demand
Economic challenges do not only concern GDP growth. The European Commission emphasizes the high cost of living, weak external demand, and a monetary tightening that have contributed to slowing economic activity in Italy.
European Scenario: Germany in Recession
Expanding the view to Europe, autumn forecasts indicate a growth in 2023 of 0.6% in both the EU and the Eurozone, below summer estimates. For 2024, a GDP growth of 1.3% is expected for the EU, slightly higher than that of the Eurozone. In 2025, the European executive predicts that with inflation easing and the brake from monetary tightening, growth should strengthen to 1.7% for the EU and 1.6% for the Eurozone. Specifically, Germany is expected to slip into recession in 2023 (-0.3%) before a modest recovery in 2024 (+0.8%).
In summary, the new forecasts from the European Commission indicate weaker economic growth for Italy in the coming years, raising concerns about debt and future prospects.