Italy faces "mild" recession: reports

ROME, Jan. 20 (Xinhua) -- Italy may already suffer a "mild" economic recession, according to data released on Friday by the Bank of Italy and a leading business organization, though both said the economy would strengthen over the second half of this year.

File photo: AFP

The two reports were the first major economic forecasts for the country released this year.

According to the forecast from retailers' association Confcommercio, a slowdown in household demand due to rising prices sparked by the Ukraine conflict appears to have created what the organization called a "short and mild ... recessionary" period.

A recession is generally defined as two consecutive quarters of negative economic growth. Though Italy's economy is likely to show positive growth for 2022 as a whole, indications are that the economy contracted in the fourth quarter of 2022.

In Friday's report, Confcommercio said that the negative trend appeared to be extending into the first quarter of this year.

The Bank of Italy said that high prices, a restrictive monetary policy of the European Central Bank (ECB) and a global economic slowdown would likely hinder growth prospects in Italy and the rest of the European Union.

In Friday's statement, the Bank of Italy said the Italian economy "weakened" in the last quarter of 2022, noting that companies interviewed by the Bank of Italy surveys "still consider the conditions for investing unfavorable."

Both Confcommercio and the Bank of Italy pointed to rising prices pushed higher by energy costs as a major drag on economic growth. According to ISTAT, Italy's National Institute of Statistics, prices in 2022 rose 8.1 percent year-on-year and ended the year with double-digit inflation in the last three months.

In its research, Confcommercio said prices would rise by "at least" 6 percent in 2023, further dampening growth prospects.

In its forecast, the Bank of Italy predicted a 0.6 percent growth for 2023, far weaker than its last year's estimate of a 3.9 percent expansion, but still higher than the forecasts of 0.4 percent in December and 0.3 percent in October.

But the Bank of Italy also warned that the economy could contract by as much as 1 percent this year in what it called an "adverse scenario" that involved Russia cutting off energy supplies completely to Italy.