The Italy’s gross domestic product is expected to grow by 0.7% in 2024 and accelerate to 1.2% in 2025: are the new OECD Economic Outlook published on 2 April by the organisation. Activity, underlines the Organization for Economic Co-operation and Development which left growth estimates for Italy unchanged compared to the February report, “remains weak”.
The analysis: weak consumption and investments
Real GDP, it is specified, grew by 0.2% in the fourth quarter of
2023 (here is the latest data which shows +0.3% also in the first quarter of 2024), supported by strong real estate investments before the reduction of the Superbonus tax credit at the end of the year, while private consumption contracted. Recent high-frequency indicators point to modest growth in the near term. While consumer confidence has improved in recent months, manufacturing production, retail sales and business confidence remain weak. «High inflation over the last two years has eroded the
real incomes, financial conditions remain restrictive and most of the exceptional aid linked to the Covid-19 pandemic and energy crises has been cancelled.”continues the Parisian organization, underlining that all this «weighs on private consumption and investments. The expected revival of real wage growth and increased investment
public linked to the funds coming from the Next Generation EU plan will only partially compensate for these difficulties”, warns the OECD.
Inflation expected to decline
Core inflation is expected to decline gradually during 2024 (latest Eurostat data here) on the back of rising unemployment and moderate nominal wage growth. In 2025, support for real household incomes resulting from the recovery in real wages, the expected increase in public investment and the strengthening of exports due to the recovery in demand from Italy’s main trading partners will lead to a slight recovery in activity, despite the modest fiscal tightening.
There is recovery, but not for everyone
«Cautious optimism has begun to take hold in the global economy, despite modest growth and the persistent shadow of geopolitical risks», reports the World Economic Outlook in the editorial entitled “A recovery in
act”. «Inflation – writes the chief economist Claire Lombardelli – is
declining faster than expected, labor markets remain strong, unemployment is at or near historic lows. Private sector confidence is improving. The recovery is unfolding differently depending on the region. The United States and a number of large emerging markets continue to show strong growth, unlike European economies. The context is expected to persist, with inflation and interest rates falling at different paces and differing needs for fiscal consolidation.”
Fears over geopolitical tensions
According to the OECD, however, substantial concerns remain. «High geopolitical tensions, particularly in the Middle East, could disrupt energy and financial markets, causing a surge in inflation and faltering growth. Debt service burdens are already significant and could increase further as low-yielding debt is rolled over. Expectations that inflation will continue to decline steadily may also prove misplaced. In the medium and long term the fiscal position is worrying. Governments face growing debt and increased spending demands due to aging populations, climate change mitigation and defense needs.”
The OECD: contain spending and carry out structural reforms
The OECD suggests «a solid approach of medium-term containment of expenditure, the increase in revenues and the concentration of political efforts on structural reforms that favor growth are necessary. Disappointing growth underlines the need to strengthen global trade and productivity. Trade and industrial policies should aim to strengthen global value chains through diversification. At the same time, accelerating decarbonization requires bold policy measures, such as investing in green and digital infrastructure, increasing carbon tariffs and promoting technology transfer.”
