MNI BRIEF: Bank Of Italy Cuts 2023 Growth View, Ups Inflation

The Bank of Italy revised downwards its 2023 GDP growth estimate to 0.3% in the baseline scenario in macroeconomic projections published Thursday, one percentage point less than in its July projections, but boosted its inflation outlook.

The Bank revised upwards its growth estimate for this year to 3.3%, despite acknowledging that “a contraction in GDP in the second half of 2022 is expected”. Its expectation for this year’s inflation climbed to 8.5%, from 7.8% in July, and to 6.5% in 2023, from 4% in July, well above the ECB’s 2% target. (See MNI SOURCES: More ECB Policymakers See Restrictive Rates)

It sees 2024 inflation at 2.3%, above July’s projection for 2%.

In its adverse scenario, which assumes energy supplies from Russia are shut off and commodity prices significantly higher, GDP is expected to contract more than 1.5% in 2023, though output should “rise moderately” in 2024. Inflation would be above 9% in 2023 and above 2.3% in 2024.

The baseline sees oil averaging around USD103 a barrel in 2022, just under USD80 in 2023 and USD74 in 2024. Natural gas prices average about EUR150 per megawatt hour in 2022, almost EUR190 in 2023 and just under EUR120 in 2024.