“The wider reduction of international quotes for oil as well as for energy goods than previously anticipated imposed a downward correction, visible in particular for inflation from the end of 2023. Thus, the estimated increase in consumer prices in December 2023 compared to December 2022 decreased by 0.6 percentage points, from 8.0% to 7.4% (the change in the annual average is insignificant, by 0.1 percentage points)”, in line with the spring version of the 2023-2026 medium-term forecast.
The economic growth anticipated for 2023, of 2.8%, is considered to be a prudent one, against the background of still high inflation, but with favorable outlook due to a good trend of services, which could subsequently trigger improved estimates. In the medium term, the annual growth rate of gross domestic product is estimated at 4.8% in the interval 2024-2026, with a peak of 5% in 2025.
Overall, the construction and services sectors are expected to thrive in 2023, seeing upwardly revised increases compared to the previous forecast (+0.8 and +0.4 percentage points, respectively), but their positive contribution will be diminished by industry, affected by supply chain disruptions and a moderate external demand. The constructions market is estimated to grow 7%, supported in particular by the component of engineering constructions stimulated by the absorption of European funds, while services are seen climbing 3.1%.
Instead, the industrial activity will be reduced under the impact of still high electricity and gas prices, with energy-intensive sectors recording activity contractions this year as well. In this context, the commission negatively revised its previous forecast of 0.8 percentage points, respectively from an increase of 0.6% estimated in January to a reduction of 0.2% in the current scenario. However, the evolution of the industry in 2023 is better than that in 2022 when it saw a 2.3% decline, the commission also noted in its spring report.
For agriculture, the commission predicts a 10.6% annual advance under favorable weather conditions for this sector after the agricultural production decreased considerably in the previous year due to the pedological drought.
Investments in the economy are seen up 6.8%, considering the dynamization of construction works, with the commission boosting its growth forecast by 0.6 percentage points compared to its 2023 winter forecast released in January.
In terms of demand, private consumption will follow a moderate dynamics (+2.7%), in line with previous estimates, given that the inflationary effect will be more intense in the first half of the year.
In terms of supply, the industrial sector is expected to enter a recovery process, once the shocks have subsided, with an expected annual increase of 4.4%.
According to the commission, risks have become more balanced in recent months, but uncertainty induced by the tense geopolitical situation makes the medium-term outlook vulnerable, as the global economy adjusts after the shocks of 2020-2022 and the recent turmoil in the financial sector. Recession concerns still prevail and inflation may turn out to be more persistent than expected, prompting continued monetary policy tightening.