Rome (Italy), December 7: The Italian government's statistics office has slashed economic growth predictions for 2023, with impacts from rising energy prices and broad inflation expected to take a greater toll than previously expected.
Italy's National Institute of Statistics (ISTAT) released its biannual economic outlook report on Tuesday, predicting that the Italian economy will grow by 3.9 percent this year, a dramatic increase from a 2.8-percent projection in June. However, its forecast for 2023 was cut to 0.4 percent, from 1.9-percent predicted in June.
Rising prices are a major drag on economic growth, ISTAT said, with preliminary estimates showing that the country's inflation in November was 11.8 percent, equal to the rate in October. Those two months recorded the highest year-on-year increases in Italy since the introduction of the euro currency.
Prices have been rising in recent months due largely to climbing energy prices, due to the ongoing conflict between Russia and Ukraine.
"The forecast scenario is characterized by ... risks associated with further price increases, a deceleration in international trade, and the persistence of a restrictive monetary policy," ISTAT said in a statement.
The adjusted growth projections are broadly in line with those from the Italian government, which based its 2023 budget proposal on estimates of 3.7-percent growth this year, and 0.6 percent next year.
In its latest estimate for Italian economic growth, the European Commission said it expected a 3.8-percent expansion this year, followed by 0.3 percent in 2023.
Despite the downward adjustments, the estimates are stronger than those from ratings agencies such as Fitch and Moody's, which projected negative growth for the Italian economy next year.
ISTAT said in Tuesday's report that the main driver for growth in the future was likely to come from a recovery in domestic demand. The agency predicted that domestic consumption would outpace overall economic growth, expanding by 4.2 percent this year and 0.5 percent in 2023. This compares to a contraction of 0.5 percent this year, and a further 0.1 percent decline next year for foreign sales for Italian goods and services.
Despite declining estimates for economic growth, consumer and business sentiment improved in November. The index for consumer confidence surged to 98.1 points, from 90.1 in October, while business confidence climbed to 106.4 points from 104.7 points. Both indicators are based on a 100-point baseline, adjusted upward or downward based on responses to an ISTAT survey.