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HomeNewsIstat Revises Growth Estimates Downward: Italy's GDP +0.7% in 2023 and 2024

Istat Revises Growth Estimates Downward: Italy’s GDP +0.7% in 2023 and 2024

In the recent report on ‘Outlook for the Italian Economy in 2023-2024,’ Istat has downwardly revised economic growth forecasts for Italy. The national GDP is now expected to grow by 0.7% in both 2023 and 2024, indicating a slowdown compared to the +3.7% recorded in 2022.

According to Istat, economic growth will be primarily driven by domestic demand, contributing positively by 0.8 percentage points in 2023 and 0.7 percentage points in 2024. However, net foreign demand will provide a slightly negative contribution in 2023 (-0.1 percentage points) and will be neutral in 2024. Previous estimates from Nadef in October anticipated growth of 0.8% in 2023 and 1.2% in 2024.

The economic growth scenario for the biennium 2023-2024

Italian GDP growth will be supported mainly by the contribution of domestic demand net of inventories, with an expected increase of 1.4% in private consumption in 2023 and 1.0% in 2024. Investments, on the other hand, will slow significantly with a modest increase of 0.6% in both years.

Employment will increase in line with GDP, with a rise of 0.6% in 2023 and 0.8% in 2024, accompanied by a reduction in the unemployment rate to 7.6% in 2023 and 7.5% in 2024.

Inflation will decrease due to the fall in energy prices and the restrictive monetary policies of the ECB, with a household spending deflator dropping to +5.4% in 2023 and +2.5% in 2024.

Istat revises estimates

Istat has revised downward the government’s growth estimates, setting the Italian GDP at +0.7% in both 2023 and 2024, in stark contrast to the more optimistic Nadef forecasts indicating growth of 0.8% in 2023 and 1.2% in 2024.

According to the statistical institute, the weakness in global trade, particularly in the German economy, has influenced the forecasts, with an expected neutral contribution from net foreign demand in both years.

Istat: Growth Challenge

OECD economist Salvatore Zecchini highlights the growth challenge on three fronts, emphasizing that the implementation of the National Recovery and Resilience Plan (Pnrr) alone is not sufficient to ensure a consistent and lasting expansion. Zecchini identifies three main areas of intervention:

Industrial Policy: The Pnrr is part of the challenge, but industrial policy broadly is crucial.

Institutional Issues: Justice, taxation, regulations, and bureaucracy need to be addressed to create an environment conducive to innovation and growth.

Aging Society Welfare: With an aging population, welfare reforms are essential to support economic growth.

Conclusion: Prospects for Italy

The downward revision of growth estimates by Istat underscores ongoing economic challenges. The need for interventions on multiple fronts, in addition to the effective implementation of the Pnrr, emerges as a priority to ensure sustainable economic growth in the coming decade. The challenge is complex, but addressing it in a coordinated manner on all fronts is crucial for the future of Italy.

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