After rebounding in the first quarter, GDP growth halted, mainly due to the slowdown in manufacturing activity. However, the growth forecast for this year remains unchanged (1.3%). For 2024 and 2025, on the other hand, the Bank of Italy downgrades estimates in the Quarterly Economic Report, forecasting +0.9% and +1% respectively. The new projections suggest that HICP inflation will average 6% this year (8.7 in 2022), with sharp declines to 2.3% in 2024 and 2% in 2025. Employment has exceeded pre-pandemic levels while the unemployment rate fell below 8%. In May, government debt increased by 4.8 billion euros compared to April, reaching a record 2,816.7 billion euros.

The reasons for braking

The Bank of Italy economic report updates estimates released last month with some downward revisions for 2024-2025. The reasons for the slowdown are related to the slowdown in investment, the decline in industry and the drop in exports, while consumption continues to grow, albeit at a slower pace. Services are developing well, especially those related to tourism and leisure activities, while the disappearance of the impact of the Superbonus leads to a slowdown in the construction sector. The international and European downturn also weighed on the economy. The macroeconomic picture remains characterized by great uncertainty. The risks are associated with the development of the war in Ukraine and the possibility of a more severe tightening of financing conditions than expected. In the euro zone, high inflation and the ECB’s monetary policy restrictions are making themselves felt, with initial effects on financing conditions.

The trade balance

Also in May, Italy recorded a trade surplus with the rest of the world of 4.7 billion euros, compared to a deficit of 62 million euros in 2022. Exports increased by 0.9% year-on-year while imports increased by 7.6% % declined according to Istat. In May 2023, Istat expects a slight economic downturn in exports (-0.3%) and a larger decline in imports (-3%). The monthly decrease in exports is due to the decrease in sales to the EU territory (-1.7%), while exports to non-EU territories are increasing (+1.2%).