The Confindustria research centre has downgraded its GDP growth projections following the tumultuous economic ride of the past three years. The organisations cautions the Italian economy is once again edging towards the modest growth rates that characterised it in previous decades.
Investments in Italy are plummeting, with only consumption and employment managing to hold steady, albeit at a slower pace. In 2023, GDP is expected to increase by a mere 0.7%, a growth rate that will be fully realised by mid-year. Furthermore, in 2024, the economic outlook appears even bleaker, with an average growth rate of just 0.5%, significantly lower than the 1.2% estimate made in March. This sluggish growth is primarily attributed to household consumption.
The drastic deceleration in GDP growth is attributed to the adverse impact of high interest rates on both businesses and households, as well as a negative trend in international trade for the current year, according to the economists at the research centre located on Via dell’Astronomy, directed by Alessandro Fontana.
Industrial production is declining, especially in energy-intensive sectors like paper, chemicals, non-metallic metals, metallurgy, and those within the construction supply chain, such as wood and metal products. However, high-tech sectors like pharmaceuticals, computer electronics and electrical equipment activities are displaying more dynamism.
Family consumption “fragile”
Family consumption seems to be “fragile but resilient.” The analysis shows that family spending is nearly stagnant in the second half of 2023 but is expected to pick up in 2024 (by 0.6%), with more momentum in the latter half of the year. This increase is attributed to declining inflation, a recovery in purchasing power, improved economic conditions, and a more sustained wage dynamic.
Confindustria reiterates its concerns about dwindling investments, particularly the diminishing influence of construction and Industry 4.0. The National Recovery and Resilience Plan (NRRP) is deemed crucial in this context. Gross fixed investments are predicted to experience a sharp slowdown, dropping from a 9.7% increase in 2022 to just 0.5% this year, and declining by -0.1% in 2024. This situation is primarily driven by the persistently restrictive monetary policy, which is having a more profound impact than expected, as well as the reduced investments compared to the initial plans in the Def (Economic and Financial Document) from April.
Foreign trade is described as “very weak,” with a setback in both imports and exports in 2023 (0.8% increase) and a gradual acceleration expected in 2024 (2.3%).
Employment trend mirrors GDP
The employment trend closely mirrors that of GDP, with full-time work units increasing at a pace slightly above this year (1.1% compared to 0.7% of GDP) in the 2023-2024 period and slightly below next year (0.2% versus 0.5%).
The cost of labour per unit of product is also projected to rise in 2023 and 2024, surpassing levels seen in other European economies. This has led to a substantial decline in Italian industry’s productivity (-1.8%). The strengthening of wage dynamics in the private sector lags behind the inflationary dynamics, mainly due to the contractual wage adjustment mechanism.
