Headline inflation in the euro area rose to 7.5% in April, “the highest rate in the history of monetary union”
The growth is there, but not as expected. Between war in Ukraine, inflation, energy issue and risk stagflation, the european commission, compared to the forecasts of February, has further cut the growth estimates of GDP for the euro area, which grew by 2.7% and 2.3% respectively against the previous forecast of 4% and 2.7%.
But not only. Even the inflation rate in the euro area it will increase this year to 6.1% compared to 2.6% in 2021 (February estimate 3.5%); in 2023 it will drop to 2.7% (February estimate 1.7%). The rate of unemployment it will stand at 7.3%, down from 7.7% in 2021 to reach 7% next year. In particular, the inflation rate in the EU will be 6.8% this year and 3.2% next year. There unemployment at 6.7% and 6.5% respectively.
Going into detail, the Commission expects that in Germany GDP will grow by 1.6% this year and by 2.4% next year, the Spain by 4% and 3.4%, the France 3.1% and 1.8%. While for theItaly GDP is expected to drop to 2.4% in 2022 and slow to 1.9% in 2023, compared to 4.1% and 2.3% forecast in February. In the spring forecast Brussels reports that “most of Italy’s growth” for 2022 is “attributable to a drag effect“linked to the” rapid recovery “recorded in 2021. Due to the current geopolitical context” the outlook remains subject to pronounced downside risks.
In this context, l‘inflation has gained momentum since the beginning of 2021. From 4.6% yoy in the last quarter of 2021 it rose to 6.1% in the first quarter of 2022. In the euro area it rose to 7.5% ad April, “the highest rate in the history of monetary union”. It is expected to peak at 6.9% in the second quarter of this year and gradually decline thereafter.
In 2021 more were created in the EU economy 5.2 million jobs, which attracted nearly 3.5 million more people to the job market. Furthermore, the number of unemployed has decreased by nearly 1.8 million people. Unemployment rates at the end of 2021 fell below their previous all-time lows.
The labor market conditions according to Brussels “they should improve further”. Employment in the EU is expected to increase by 1.2% this year, although this annual growth rate is spurred by the strong momentum in the second half of last year. People fleeing the war in Ukraine to the EU should only enter the labor market gradually, with tangible effects that will only become visible from next year,
The deficit / GDP in the euro area it will go this year from 5.1% in 2021 to 3.7% and next year to 2.5% (EU from 4.7% to 3.6% and 2.5%). Debt / GDP will go from 97.4% last year to 94.7% this year and 92.7% next year. In the EU since 89; 7% last year to 87.1% this year and 85.2% next year. Overall, the spring forecast report indicates that public deficits continue to decline, but increase costs related to war.
Despite the cost of measures to mitigate the impact of high energy prices and to support people fleeing Ukraine, the aggregate public deficit in Ukraine is set to decline further in 2022 and 2023 as temporary support measures for Covid 19 continue to be withdrawn. After falling in 2021 to around 90% (97% in the euro area) from its historic peak of almost 92% of GDP in 2020 (almost 100% in the euro area), the aggregate EU debt-to-GDP ratio is expected to continue to decline. staying above the pre-Covid level
Gentiloni: “In Italy there is fiscal space for other measures if with caution, no to budget variance”
“The uncertainty about the prospects has clearly increased and the risks” linked to the “downside” of EU growth “are mainly linked to the duration of the war”, declared the European Commissioner for the Economy. Paul Gentiloni, at the press conference to present the European Commission’s spring economic forecast.
“Given the unprecedented nature and magnitude of the shocks affecting the EU economy, our basic forecast is supported by several technical assumptions”, he specified Gentiloni. The Commission hypothesized that “extremely high geopolitical tensions should not normalize before the end of the forecast horizon”, ie the end of 2023. “In the forecast horizon, it is the second hypothesis, there are no significant interruptions in the supply of energy raw materials to the EU economy ”, underlined the commissioner.
Bankitalia: new record for Italian public debt in March, over 2.755 billion
In this context of crisis, the Italian public debt updates its all-time high in April. Last month, reports the Bank of Italy, the public administration debt increased by 18.9 billion compared to March, reaching 2,755.4 billion. The increase, explains the central institute, is due to the borrowing requirement (22.8 billion), which more than offset the reduction in the Treasury’s liquidity (6.4 billion, to 95.6); the overall effect of spreads and premiums on issue and redemption, the revaluation of inflation-linked securities and the change in exchange rates increased the debt by € 2.4 billion.
With reference to the breakdown by subsectors, central government debt increased by 18.9 billion; that of local administrations and that of social security institutions remained virtually unchanged. At the end of March the share of the debt held by Bank of Italy it was 25.5 per cent (unchanged from the previous month); the average residual life of the debt remained stable at 7.6 years. In March, tax revenues accounted for in the state budget amounted to 33.2 billion, an increase of 10.2 percent (3.1 billion) compared to the same month of 2021. In the first quarter of the year, tax revenues were amounted to 108.9 billion, up 13.5 per cent (13.0 billion) compared to the same period last year.