Istat: Italian GDP will slow down significantly in 2023

In the two-year forecast period contemplated by Istat, GDP growth would be supported by the contribution of domestic demand net of inventories (+4.2 and +0.5 percentage points, respectively) while net foreign demand would provide a negative contribution in both years (-0.5 and -0.1 percentage points)

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Istat GDP
In early December Istat published an analysis on the outlook for the Italian economy in 2022-2023, according to which GDP is expected to grow at a still strong pace for 2022 (+3.9 percent) and then slow down significantly in 2023 (+0.4 percent).
The forecast scenario is characterized by particularly favorable assumptions on the path of price reduction in the coming months and the full implementation of the public investment plan planned for next year.
In the two-year forecast period, GDP growth would be supported by the contribution of domestic demand net of inventories (+4.2 and +0.5 percentage points, respectively) while net foreign demand would provide a negative contribution in both years (-0.5 and -0.1 percentage points). In 2022 stocks are expected to make a marginal positive contribution +0.2 p.p. to be followed by zero in 2023.

Consumption by resident households and ISPs (private social institutions) will evolve in line with the trend in economic activity, marking a marked increase in 2022 (+3.7%) followed by a slowdown in the following year (+0.4%). Investment is expected to be the driving force behind the Italian economy both in the current year (+10.0%) and, to a lesser extent, in 2023 (+2.0%).

Over the two-year forecast period, employment, measured in terms of ALUs, will mark a higher growth than that of GDP with a steeper increase in 2022 (+4.3%) than in 2023 (+0.5%). The improvement in employment will be accompanied by that of the unemployment rate, which will fall significantly this year (8.1 percent) and then rise slightly in 2023 (8.2 percent).

The prolonged phase of price growth, supported by the exceptional increase in those of energy goods, is expected to be reflected in the trend of the deflator of resident household spending both in the current year (+8.2 percent) and, to a lesser extent, in 2023 (+5.4 percent).

The performance of the Italian economy

In the third quarter of 2022, the expansion phase of the Italian economy continued (+0.5 percent was the economic change), the level of which far exceeded the pre-crisis level.

On the supply side, heterogeneous trends emerged among sectors. In services, the expansion phase of value added (+0.9 percent) continued, driven by the trade, transportation, accommodation and food service sectors, while agriculture, industry in the narrow sense and construction, on the other hand, showed a decrease. In November, household and business confidence indexes showed an upturn, interrupting the downturn that had characterized the previous months. Consumers expressed a general improvement in judgments on all components of the index, while among manufacturing firms there was a marked recovery in production expectations. In construction, there was a widespread deterioration in judgments.

Signs for the coming months appear mixed. On the one hand, improvements in business confidence and the labor market recorded in October support the possible holding up of production rates. On the other, it is worth mentioning how in the third quarter, among manufacturing firms, the share of those who point to higher costs and prices as an obstacle to exports rose further. The share of firms identifying insufficient demand as an obstacle to production also increased during the same period.


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