The clouds that used to gather over the Italian economy are lifting. The owls that predicted the collapse of production last year, thousands of unemployed on the loose and social tragedies, never spoke again. The wind seems to have changed. And Prime Minister Meloni’s government will take advantage of this, making the center-left swallow bitter pills.
The fall in gas prices after the summer surges, mainly caused by Germany’s purchases without price limits in defiance of European solidarity, and the limited fluctuation in the cost of crude oil around 85 dollars, suggest a less gloomy 2023 than that announced by leading research institutes and major estimating organizations. Yesterday it was Confindustria that recognized that the Italian economy, given changing international conditions, could do much better this year than previously thought. For viale dell’Astronomia the situation “is going better than expected”.
Of course, inflation is still very high and equal to 11.6% in the latest Istat survey. But this figure is already a thing of the past because the industrial association revealed that the price of gas at the lowest levels for over a year and the resilience of household purchasing power have sustained productive activity. And the main thermometer of the economy, that is, the stock exchanges, have already anticipated positive signs with recovery rates in the first weeks of 2023.
One year, twenty-three, which is a number traditionally associated with luck, and which creates a huge problem for those who, even within the country, are rooting for the collapse of the system to make bankruptcy payable to the current majority. The same ones who preached the disaster after the departure of Mario Draghi from the government with the spread in orbital levels. A prophecy of disgrace that did not materialize, fortunately, for the stability of the banking system and for the safeguarding of Italian savings. The week ended with a plateau in the yield differential between the BTP and the Bund at 180 basis points. In short, no alarm from the markets for the Belpaese economy.
However, catastrophists did not spare tragedies. Last September, Standard & Poor’s, the US ratings agency, had given a negative verdict for 2023 with a GDP of -0.1%. While Fitch, the most pessimistic of all, reached a drop of 0.7%. Even economists at the International Monetary Fund have always conceded little to our country. And its forecast for last October pointed to a contraction of the economy by 0.2% in 2023. Although the fall in gas prices, which started in November, can be considered almost structural, S&P’s considered, however, that Italy should succumb under the weight of geopolitical and economic factors.
In the last December report, just a month ago, economists put the recession under the Christmas tree in 2023, with GDP expected to fall by 1.1%. Then the turning point. Sudden perhaps for many scholars, but quite evident in the wake of the dynamics of energy products, whose prices have returned to pre-conflict levels in Ukraine. A condition that has already produced the first effects on inflation, in a slight slowdown and in any case in the process of cooling down, and which lays the foundations for the different change in the expectations of families and companies. To complete the information, however, in this case, an important distinction must be made.
The reduction in the cost of methane is linked not only to international factors, but also, and unfortunately, to the lower energy consumption of Italian industries which, aware of the slowdown in the economy, announced with great fanfare, put their machines to work at a standstill. Nothing, therefore, excludes possible increases in the coming months if the prospects return to optimism. But compensating them this time would be a factor that has not yet had the opportunity to explain its effects. And that’s the price ceiling for oil and gas. Even if it’s not clear how and when it will actually work, its presence alone is enough to keep speculators at bay. Who don’t like obstacles of any kind that might dampen the effect of their financial gambles. So last summer’s inflated bills are unlikely to be seen. Another element that is a good omen and leaves the “owls” with their wings clipped.
The Bank of Italy has already noticed. Last Friday, Palazzo Koch wrote in black and white that next year the expected slowdown will be less strong than expected with a GDP of +0.6%. At this point, you just need to believe.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
