Italy’s economy shows resilience despite high debt and ECB rate hikes
The global economic outlook is showing signs of improvement as Italy appears to have avoided a recession despite being impacted by costly energy prices and record high inflation.
Italy’s Economy Minister, Giancarlo Giorgetti, has given a less gloomy forecast for the right-wing government, stating that the latest available data suggests that a recession has been averted.
The news is a positive development for Italy, the eurozone’s third-largest economy, which had contracted by 0.1% in the fourth quarter of 2022.
The government has revised its outlook, expecting growth in the first three months of this year, which is reflected in the more upbeat remarks by Giorgetti in his speech at a Milan university.
The Italian government’s action has focused on minimizing the risk of recession, and the annual growth is now expected to be almost 1%, up from the 0.6% target set in November.
However, Giorgetti has cautioned that European Central Bank rate rises would pose “serious problems” for high-debt countries such as Italy. The rising interest rates are unknown in a world that was accustomed to living at zero or negative interest rates.
Therefore, Italy needs to keep following a “cautious and responsible” fiscal policy to lower its public debt.
Italy’s 2023 budget has earmarked over 21 billion euros ($22.4 billion) to help firms and households pay electricity and gas bills in the first quarter of this year, and the government is working to review and extend those relief measures.
The Prime Minister’s administration is due to unveil its new growth estimates and public finance targets next month, which will provide an opportunity to assess the economic situation, define objectives for the medium term, and identify the most appropriate actions to support families and businesses.
The global economic outlook remains uncertain, but Italy’s positive economic data offers some hope for a brighter future.