The Italian economy performed better than expected in 2023 to the point that the carryover effect generated has pushed many experts to revise its performance this year upwards. The higher growth was, however, accompanied by a higher public deficit, mainly due to the higher-than-expected costs linked to incentives for the renewal of the building bonus. The upward correction of the final figures from last year (Istat also corrected the 2022 GDP positively), reflects the significant evolution of some variables, especially investments in construction, suggesting higher economic growth than previously expected.
+1% growth expected this year
In detail, Prometeia reports, real GDP growth in 2022 was revised from 3.9% to 4.1%, and that in 2023 was corrected from 0.7% (preliminary estimate in the February Brief) to 1 %. Due to the higher deflator growth, the revision of nominal GDP is even larger: from 6.8% to 7.7% in 2022 and from 5% to 6.2% in 2023. The performance of the fourth quarter was confirmed in line with that of the third quarter (+0.2%), with a positive contribution from net external demand, driven by the stagnation of imports compared to a constant recovery of exports, and a contribution negative domestic demand, driven by a decrease in household consumption.
The prudence of families
In fact, as the experts themselves point out, household consumption contracted (-1.4% quarterly), reflecting the decrease in services and further small reductions in non-durable goods, while the expansionary cycle of durable goods continued. Meanwhile, the fall in spending was conditioned both by the decrease in purchasing power (-0.5%) and by the increase in savings, which rose to 7% in the last quarter of 2023 (but is still at its lowest historical value, equal to an annual average of 6.3% compared to 8% pre-pandemic). The increase in investments strengthened (2.4%), especially in the construction and machinery and equipment sectors.
Behind the push are the PNRR and the Superbonus
The greater dynamism seen since the second half of 2022 was favored above all by a higher-than-expected increase in residential construction (in particular the effects of the PNRR and the 110% Superbonus). In fact, the 2023 public finance data show a significant increase in the public contribution to investment growth, with contributions from incentives and direct expenditure. Specifically, in 2023 the cost of the Superbonus has almost doubled compared to 2022 (equal to a total cumulative cost of 160.3 billion euros as of 4 Aprilaccording to the Revenue Agency) and public investments rose by 11.8% (exceeding initial estimates of around 8 billion euros).
In 2024 the contribution of the PNRR will increase
Regarding the latest information on the PNRR, its implementation is on schedule and is therefore making up for previous delays. Total PNRR spending in 2023 was approximately 21 billion, representing a total of 45.7 billion euros out of a planned plan of 46.6 billion euros. This support will increase in 2024 and will continue to support growth as construction bonuses are phased out. GDP growth is expected to continue into 2024, but at a slightly slower pace. Recent qualitative indicators suggest a very slight recovery phase, and Prometeia’s WEIP indicator indicates stabilization.
Industrial production still stagnant
In particular, the same experts estimate that GDP growth will stand at +0.1% cyclical in the first quarter. In a context that sees stronger-than-expected construction production, industrial production is instead indicated for February as stagnant (+0.1% monthly) after the drop in January, and has not yet reversed the negative trend underway since 2022. On an annual basis, Prometeia estimates that GDP will increase by 0.7%, limited by the decline in private investments in construction, while the bonuses in construction sector have expired and replaced, only in part, by the faster payments of the PNRR. Consumption growth will also be modest and lower than the growth in purchasing power.
