Euronews Business takes a closer look at Italy's current economic situation as its latest gross domestic product (GDP) figures are released.
ADVERTISEMENTItaly's GDP for the third quarter of 2023 was revised up to an annualised growth rate of 0.1% quarter-on-quarter, according to the final data released by the national statistics bureau ISTAT.
This positive revision comes after a 0.4% contraction in the previous quarter, allowing Italy to escape the threat of entering a technical recession characterised by two consecutive quarters of negative growth.
The year-on-year variation in Italy's GDP also stands at 0.1%, surpassing earlier estimates of a flat reading.
National statistics revealed that final consumption expenditure and gross fixed capital formation both decreased by 0.2% compared to the third quarter of 2022. Furthermore, imports witnessed a notable decline of 3.2%, while exports also dipped by 0.4%.
In its latest October bulletin, ISTAT reports continued concerning signals for the Italian economy. In October, both consumer and business confidence indexes recorded further declines, with negative trends affecting all components, except for a few exceptions.
Italy’s manufacturing activity contracts further
The Italian manufacturing sector is experiencing a significant contraction. In November, the Purchasing Managers' Index (PMI) was revised downward to 44.4 points from the previous estimate of 45.3. This decline followed October's reading of 44.9, indicating deteriorating demand conditions. Contractions in production and factory orders were particularly notable. November marked the eighth consecutive month of contraction.
Commenting on the PMI data, Dr. Tariq Kamal Chaudhry, Economist at Hamburg Commercial Bank, expressed concerns, stating, "Italy's manufacturing industry is at risk of getting stuck in the recession muck."
The economist noted that the fragility was notably apparent in output, purchase quantities, inventory levels, and employment when compared to the preceding month.
“The fact that companies are reducing their workforce numbers due to a shortage of skilled workers is worrisome, suggesting tough times ahead for Italy's goods-producing industry,” he added.
The economic slowdown is also reflected in disinflationary trends. Italy's annual inflation rate fell to 0.8% in November 2023, a significant drop from 1.7% in the previous month, marking the lowest rate since March 2021.
Government’s budget adjustments for 2024
Italy's government had already warned of a temporary growth reversal in the second quarter of 2023, attributing it to factors such as eroding household purchasing power due to high inflation, prolonged uncertainty caused by the Ukrainian conflict, a stagnant European economy, and declining global trade.
In its draft budget plan for 2024, the government revised down its GDP growth forecast for the current year from 1.0% to 0.8% and adjusted its estimates for 2024 from 1.5% to 1.0%. Italy is expected to drive next year's budget deficit up to 4.3% of GDP, with the debt-to-GDP ratio projected to remain above 140% until the end of 2026.
Resilient stock market performance despite economic fears
Despite the challenging economic scenario, Italy's domestic stock market index continues to perform remarkably well.
It has surged by 25% in the first eleven months of the year, reaching its highest level since July 2008. With still a month to go,2023 is shaping up to be the second-strongest year for the Italian stock market in the past two decades, defying the country’s economic concerns.
