Italian economy is at a standstill. Image credit : Image by masadepan on Freepik

Italian economy almost at a standstill and debt grows

Business News

The Italian economy is in stagnation and in the fourth quarter of 2023 GDP growth is almost at a standstill, Italy’s leading industrial association Confindustria said today.

Confindustria’s monthly flash economic outlook reports, “Inflation has come down, but the economy is weak.”

Industry and services are still in difficulty”, but “with some light” for industry, the report continues. “Interest rates will remain high for a few more months and credit is too expensive”.

In addition, global trade and Italian exports “lack real momentum” and are weighed down by the cost of oil and gas.

Furthermore, the Bank of Italy yesterday revised downwards to 0.6% its GDP growth estimate for 2024 due to “signs of more prolonged economic weakness”. In October it put the estimated growth forecast for next year at 0.8%.

Italy’s central bank also said the economy would grow by 1.1% in 2025 and 2026 “due to the assumptions inferred by the financial markets of slightly lower interest rates”.

Annual inflation estimate also down

On Friday, ISTAT revised downwards from 0.8% to 0.7% its annual inflation estimate for November. By comparison, in October the national consumer price index for the entire collectivity (NIC), including tobacco products, registered an increase of 1.7% year-on-year.

Month-on-month, inflation in November decreased by 0.5%.

Likewise, ISTAT said the increase in the cost of food, household and personal care items (the so-called “shopping trolley” goods) continued to slow on an annual basis, falling from +6.1% in October to +5.4% in November. This is 0.4% less than ISTAT’s initial estimate of 5.8%.

Year-on-year growth in the price of high-frequency purchase products instead fell from +5.6% to +4.6%, compared to an initial estimate of +4.8%, the statistics agency added.

Public Debt grows

Italy’s public debt hit a new record in October, rising by €23.5billion over the previous month to reach €2,867.7billion, the Bank of Italy reported Friday.

In its statistical supplement ‘Public Finance: requirements and debt’, the Italian central bank said the increase reflected the growth in the Treasury’s liquid assets (by €20.5billion to €52.5billion). It also considered public administration requirements (€1.2 billion), as well as the effect of issuance and redemption discounts and premiums, the revaluation of inflation-indexed securities and changes in exchange rates (to a total of €1.8billion).

On Friday, the Economy Minister Giancarlo Giorgetti said, “When talking about the Italian economy we cannot ignore the fact that we are part of a wider context” in which wars and pandemics “have had an impact on public debt”. He was speaking at Premier Giorgia Meloni’s Brothers of Italy (FdI) rally Atreju in Rome.

“We are not in a normal period, but in an abnormal one, and that obliges those who are most in debt to be careful and attentive,” he continued.

The minister said “any type of action taken by the government must inspire credibility” because “every fortnight international financial institutions buy our debt and we pay more or less based on our perceived reliability”.

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