Italy in recession is a “global risk” . The IMF raises the alarm on economic governance
“Stagnation”, says the minister for the Economy, Giovanni Tria: manufacturing and GDP stationary, without any growth. “Recession”, claims the Bank of Italy, fearing that the second quarter of 2018 too produced negative growth (the official data will arrive on 31st January). There is a technical difference between the two phenomena. But not a particularly telling one. From the point of view of the performance of the Italian economy, be it growth 0 or growth -1, one fact emerges very plainly in the eyes of entrepreneurs, economic players, and citizens: Italy is a country which is blocked, with profoundly negative consequences for wealth, incomes and jobs. “Italy got through 2018 under all the signs of a slowdown”, claims the 23rd global Report on the Economy by the Einaudi Centre, which was presented yesterday at the Assolombarda (Lombardy industrial association), in Milan, by Mario Deaglio, for whom “the outlook for the future is uncertain”, not to say a “big question mark”.
The forecasts for 2019 are somewhat alarming. The International Monetary Fund, in its analysis of the world economies presented yesterday at the World Economic Forum in Davos, places the financial situation in Italy and Brexit at the top of the list of principal global risk factors and underlines the “costly intertwining between sovereign risks and financial risks” which can seep out of Italy to contaminate the EU but also other economies. A serious situation. Faced with which, in total disregard for the data and the facts, the minister for Work and Development, Luigi Di Maio, ventures the forecast of “a new economic boom” similar in intensity to that of the early 1960’s (at that time Italy, in the throes of mass industrialisation, achieved growth of 5% a year).
Unfortunately, it is not clear on what grounds the assessments of the minister Di Maio were based. The data, based on accurate studies and robust documentation, which come from authoritative economic institutions, are more explicit.
The Monetary Fund suggests, for Italy, a growth rate of barely 0.6% in 2019, a figure revised downwards compared to earlier estimations, in the context of weaker EU growth: 1.6% compared to 1.9% previously, as a result of the German slowdown (negatively impacted by the crisis in the car manufacturing sector) and of the social tensions in France. 0.6% is also the outlook from the Bank of Italy. We have 0.7% from a panel of economists surveyed in the early days of January by Bloomberg. Others have even worse figures: 0.3%, estimates Oxford Economics, 0.4% is what Goldman Sachs had already quoted in December. “It will be difficult even to achieve a GDP of 0.5%”, estimates the authoritative economist Guido Tabellini, ex-rector of the Bocconi University, in La Stampa newspaper. 0.5% is also the figure agreed by another internationally renowned economist, Carlo Cottarelli.
And what about the Government? It started with 1.5% in its preparations for the Budget Law, in autumn, and then had to curtail its optimism when it drafted the law, basing it on 1%. The IMF and Bank of Italy have practically halved this forecast.
There are international trade tensions behind this economic slowdown. But also purely Italian causes. Suspended investment. Public works construction sites halted (the policy of the 5-Star-League Government, which is hostile to major infrastructure works, does not help – on the contrary). An increase in the fiscal burden for businesses and banks, probably the worst thing a government can come up with, at a time of difficulty for the economy. Cuts in the resources for research, innovation, and the development of the manufacturing apparatus. A general climate of hostility towards businesses, stymying their ability to create jobs, well-being and growth. And massive public sector indebtedness, specifically under the Budget law, just for two assistance measures, for a mass clientele: a quota of 100 for pensions (but with cuts to the cost-of-living adjustment for medium-sized pensions, thus hitting the tedious familiar calculation of hundreds of thousands of people already receiving pensions) and a “citizen’s income”.
In the background, there is the general uncertainty fomented also by an arrogant and harmful dispute built up for some time by the Government against the EU, which has negatively impacted the markets and driven a spike in the spread (with consequent effects on the solidity of banks, the costs of borrowing, and the performance of loans and mortgages). And a notable fall in confidence on the part of families and businesses.
This is the point: widespread mistrust, halted investments, alarmed businesses and consumers. The slowdown of the economy certainly does not inspire thoughts of any boom envisaged in the propaganda of minister Di Maio, but of negative growth, singularly “unfortunate” for Italians.
Luckily, within this negative climate, there is an “Italy for action”, a public opinion of “yes we can” (for the High-Speed Rail Link, for public works, for jobs, for investment) which is marching in the streets (such as the 30 thousand people in Turin last week) and which is calling for a different future for Italian economic policy: not hand-outs, but high-quality growth. This is the Italy of the sound businesses, above all industrial and artisanal ones, which from Turin to Milan, from the Veneto to the Emilia and Friuli regions, is unwilling to resign itself to mistrust, to paralysis, or to any “big question mark” about our future.
“Stagnation”, says the minister for the Economy, Giovanni Tria: manufacturing and GDP stationary, without any growth. “Recession”, claims the Bank of Italy, fearing that the second quarter of 2018 too produced negative growth (the official data will arrive on 31st January). There is a technical difference between the two phenomena. But not a particularly telling one. From the point of view of the performance of the Italian economy, be it growth 0 or growth -1, one fact emerges very plainly in the eyes of entrepreneurs, economic players, and citizens: Italy is a country which is blocked, with profoundly negative consequences for wealth, incomes and jobs. “Italy got through 2018 under all the signs of a slowdown”, claims the 23rd global Report on the Economy by the Einaudi Centre, which was presented yesterday at the Assolombarda (Lombardy industrial association), in Milan, by Mario Deaglio, for whom “the outlook for the future is uncertain”, not to say a “big question mark”.
The forecasts for 2019 are somewhat alarming. The International Monetary Fund, in its analysis of the world economies presented yesterday at the World Economic Forum in Davos, places the financial situation in Italy and Brexit at the top of the list of principal global risk factors and underlines the “costly intertwining between sovereign risks and financial risks” which can seep out of Italy to contaminate the EU but also other economies. A serious situation. Faced with which, in total disregard for the data and the facts, the minister for Work and Development, Luigi Di Maio, ventures the forecast of “a new economic boom” similar in intensity to that of the early 1960’s (at that time Italy, in the throes of mass industrialisation, achieved growth of 5% a year).
Unfortunately, it is not clear on what grounds the assessments of the minister Di Maio were based. The data, based on accurate studies and robust documentation, which come from authoritative economic institutions, are more explicit.
The Monetary Fund suggests, for Italy, a growth rate of barely 0.6% in 2019, a figure revised downwards compared to earlier estimations, in the context of weaker EU growth: 1.6% compared to 1.9% previously, as a result of the German slowdown (negatively impacted by the crisis in the car manufacturing sector) and of the social tensions in France. 0.6% is also the outlook from the Bank of Italy. We have 0.7% from a panel of economists surveyed in the early days of January by Bloomberg. Others have even worse figures: 0.3%, estimates Oxford Economics, 0.4% is what Goldman Sachs had already quoted in December. “It will be difficult even to achieve a GDP of 0.5%”, estimates the authoritative economist Guido Tabellini, ex-rector of the Bocconi University, in La Stampa newspaper. 0.5% is also the figure agreed by another internationally renowned economist, Carlo Cottarelli.
And what about the Government? It started with 1.5% in its preparations for the Budget Law, in autumn, and then had to curtail its optimism when it drafted the law, basing it on 1%. The IMF and Bank of Italy have practically halved this forecast.
There are international trade tensions behind this economic slowdown. But also purely Italian causes. Suspended investment. Public works construction sites halted (the policy of the 5-Star-League Government, which is hostile to major infrastructure works, does not help – on the contrary). An increase in the fiscal burden for businesses and banks, probably the worst thing a government can come up with, at a time of difficulty for the economy. Cuts in the resources for research, innovation, and the development of the manufacturing apparatus. A general climate of hostility towards businesses, stymying their ability to create jobs, well-being and growth. And massive public sector indebtedness, specifically under the Budget law, just for two assistance measures, for a mass clientele: a quota of 100 for pensions (but with cuts to the cost-of-living adjustment for medium-sized pensions, thus hitting the tedious familiar calculation of hundreds of thousands of people already receiving pensions) and a “citizen’s income”.
In the background, there is the general uncertainty fomented also by an arrogant and harmful dispute built up for some time by the Government against the EU, which has negatively impacted the markets and driven a spike in the spread (with consequent effects on the solidity of banks, the costs of borrowing, and the performance of loans and mortgages). And a notable fall in confidence on the part of families and businesses.
This is the point: widespread mistrust, halted investments, alarmed businesses and consumers. The slowdown of the economy certainly does not inspire thoughts of any boom envisaged in the propaganda of minister Di Maio, but of negative growth, singularly “unfortunate” for Italians.
Luckily, within this negative climate, there is an “Italy for action”, a public opinion of “yes we can” (for the High-Speed Rail Link, for public works, for jobs, for investment) which is marching in the streets (such as the 30 thousand people in Turin last week) and which is calling for a different future for Italian economic policy: not hand-outs, but high-quality growth. This is the Italy of the sound businesses, above all industrial and artisanal ones, which from Turin to Milan, from the Veneto to the Emilia and Friuli regions, is unwilling to resign itself to mistrust, to paralysis, or to any “big question mark” about our future.