MILAN (AFP) – The Bank of Italy on Friday more than doubled its growth forecast for the current year, helped by better-than-expected first-quarter expansion in gross domestic product, while warning of “high uncertainty” from the Ukraine war.
The central bank now expects gross domestic product (GDP) to grow by 1.3 per cent in 2023, up from its 0.6 per cent forecast published in January.
Despite the 0.6 per cent expansion seen in the first quarter, growth will remain moderate, the bank warned, “curbed by the effects of worsening financing conditions.”
In 2024 and 2025 it now forecasts growth of one per cent and 1.1 per cent, respectively, versus the 1.2 per cent estimated for each year in January.
Household consumption, which fell at the end of 2022, is expected to expand moderately over the three-year period at a similar pace to GDP growth, helped by declining inflation tied to lower energy costs.
Inflation is expected to decline to 6.1 per cent this year, then drop to 2.3 per cent in 2024 and two per cent in 2025, returning to the European Central Bank’s long-term target.
The forecasts assume that commodities will not be further impacted by the war in Ukraine, with prices remaining “broadly stable” over the period at lower levels than seen in 2022.
“The conflict in Ukraine is still one of the main factors for instability, which may trigger further rises in the prices of energy commodities and deterioration in the confidence of households and firms,” the bank wrote.
