MNI BRIEF: BOI See Italy 23/24 Inflation Higher On Wage Growth

The Bank of Italy has revised its Italian inflation forecasts upwards, now expecting prices to rise by 1.9% this year, 0.4 percentage points higher than envisaged in July, before accelerating to 2.8% in 2022, 1.5 points higher than July's forecast. Increases will be “driven above all by the impact of the increase in the prices of energy products, expected to wane around the end of next year."

In 2023 inflation will fall to 1.5% and to rebound to 1.7% in 2024 “reflecting the gradual acceleration in wages and the reduction in spare capacity,” the central bank said. The BOI warns inflation could be higher than projected if energy prices remain elevated and if wages increases are “greater than anticipated”.

GDP growth is expected to rise to 6.2% in 2021, more than a full percentage point higher than previous forecasts. The Italian economy will regain pre-pandemic levels by mid-2022. The projections assume that covid cases will continue to grow in the coming weeks but will not lead to a significant tightening of restrictions