The climate of uncertainty and the problems in international trade, caused by the outbreak of the conflict in Ukraine, further complicate Italy’s post-pandemic recovery, already with the brakes on. In fact, according to provisional estimates, in the first three months of 2022 industrial production dropped (with the exception of construction) for the first time since spring 2020 and inflation reached levels not seen since the early 1990s. Starting from this photograph, Bank of Italy draws three possible scenarios in its monthly bulletin.
In the most favorable circumstance, a rapid resolution of the conflict would be found and therefore the tensions underlying the rise in the prices of raw materials would be reduced. Italy’s GDP would expand by 3% in 2022 and then by 3.1% in 2023, while inflation would be 4% this year to drop to 1.8% in the next.
In the intermediate scenario, assuming the continuation of hostilities, GDP would increase by 2% in both years and inflation would be 5.6% in 2022 and 2.2% in 2023.
The last scenario, the worst, foresees the worsening of the war until the interruption of natural gas supplies from Moscow starting from May, with the Italian GDP that would decrease by almost half a point both in 2022 and in 2023. The downsizing compared to the Via Nazionale’s January forecast would be over 7% in the two-year period 2022-23. Inflation would rise to 8% this year and then fall to 2.3% in the next.
However, these scenarios do not take into account, the Bank of Italy specifies, any economic policies at national and EU level that may be “adopted to counteract the recessionary pressures and curb the price pressures highlighted “.
Concerns about the consequences of the war are particularly high in Italy and Germany because their economies are the most dependent on Russian raw materials and would be the most vulnerable to a possible blockade of exports to Russia. On the one hand, in fact, the input of energy and metals from Russia represents 7% of the total Italian and 8% German requirements. On the other hand, Russian final demand absorbs 0.6% of the total added value produced in Italy and 0.9% of that produced in Germany, well above the 0.3% average of the other advanced economies.
Yet Bank of Italy has not proved so pessimistic for the future of the Italian economy in the event of a Russian gas stop, despite exceeding 45% of the country’s total needs. Specifically, the compensation of about two-fifths of natural gas flows from Russia could be achieved by the end of 2022 and, moreover, without affecting national methane reserves but “through the increase in the import of liquefied natural gas,” the greater use of other suppliers and the increase in the extraction of natural gas from national fields “, explains the bulletin. And the total replacement of Russian imports could take place with substantial investments in renewable sources, as well as through greater diversification of suppliers.
On the other hand, the exposure of Italian banks to the Russian Federation is “moderate” and therefore manageable, reassures Via Nazionale. At the end of 2021, loans disbursed by Italian banks to residents in Russia, Belarus and Ukraine amounted to € 19.3 billion (of which 19 for Russia), approximately 0.5% of assets. And companies in Russia were the main beneficiaries, receiving loans amounting to 14.5 billion. However, this does not mean that the conditions of the Italian financial market have not been affected by the heightening of uncertainty and the growing risk aversion of investors, especially just after the invasion of Ukraine. Share prices have only partially recovered, the sovereign spread and the financing costs of companies and banks have risen. Banks will therefore have to be very cautious in the distribution of dividends, as the general manager of Bank of Italy, Luigi Federico Signorini, warned. (All rights reserved)

Previous articleHow to know your testosterone level: what are the acceptable percentages
Next articleLake Orta: how to get there, what to see and where to eat