The governor of Bank of Italy Ignazio Visco
Bank of Italy sees inflation falling to 6.5% in 2023. But without Russian gas it will rise to 10%
Inflation, which has risen to almost 9% on average in 2022, would drop to 6.5 this year and more decisively thereafter, reaching 2% in 2025. This is what the Bank of Italy predicts in its updated economic projections in a baseline scenario which assumes that the tensions associated with the war in Ukraine will still remain high in the first months of 2023 and gradually decrease along the forecast horizon.
In an adverse scenario, characterized by a permanent interruption of energy supplies from Russia, consumer price inflation would rise further, approaching to 10% this year, before falling to just over 4 in 2024 and to drop decisively towards 2% in 2025, when “the direct and indirect impact of the energy price rise would be offset by the opposite impact deriving from the deterioration of cyclical conditions. The latter would weigh on price dynamics more persistently”.
In the baseline scenario, HICP inflation, equal to 8.7% in 2022, it would reach 6.5 on average this year, to then drop to a more pronounced extent, to 2.6% in 2024 and 2% in 2025. The drop, explains Bankitalia in the economic bulletin, “strongly depends on the hypothesis of a progressive decrease in the prices of raw materials, whose effects would be only partially offset by the acceleration of wages”. Core inflation would rise further in 2023, to 3.8%, to decrease to values close to 2% in 2025.
This trend, he underlines again Via Nazionale“reflects the relatively strong dynamics of de facto private sector wages over the three-year forecast period, which would contribute and the hypothesis of fewer delays than in the past in the renewal of expired contractsand a partial recovery of the difference between the inflation realized and that used as a reference in the previous contracts. The GDP deflator would grow at rates on average slightly below 4%, driven by the increase in labor costs and the partial recovery of profit margins”.
Overall of 2022 the Italian GDP would have increased by 3.9%. Economic activity, supported for most of 2022 by robust consumption dynamics and investments, would have weakened in the final months of the year, as estimated by the Bank of Italy in its bulletin, according to which the weakness of the product should also continue in the current quarter, to gradually ease from the spring. According to the Via Nazionale institute, growth should gain more strength from 2024, in conjunction with the decrease in inflationary pressures and uncertainty. On average for the year, GDP would increase by 0.6% in 2023 and by 1.2% in 2024 and 2025.
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