Two years after the pandemic, the energy crisis, the “bomb” of inflation and the RussoUkrainian War will they cause a new recession for Italy? For 2022, the scenarios are decidedly less optimistic than last year, when the recovery from the hit of the pandemic year was hailed as a victory and even as a harbinger of a new economic boom in certain parts and by the Draghi government. The situation was much more complex then and even more so today.
There is a strong risk of a global recession that could also plunge our country into a technical recession for at least two quarters, and there is a basic fact to support this: In the United States, shortterm government bond yields are on the verge of matching longterm bond yields (and some believe to outperform them in the short term). This means that they are expected in the short termuncertainty and volatility. At 1.98%, the twoyear bond pays almost as much interest as the tenyear bond (2.19%). The difference between the two stocks fluctuates between 15 and 20 basis points, while a year ago it fluctuated between 145 and 150 points. A sign that shortterm bonds include the Fed’s squeeze and antirecession measures. A phase of acute tension is therefore expected for the American economy, in which the inflation and price bombs hit the growth prospects. And you know, when America sneezes, the world catches a cold.
Eyes on the old continent, Il Sole 24 Ore states: “Whatever the economic impact of this war, Europe will suffer the greatest consequences”, which also finds itself in a position not to exploit you monetary policy countercyclical compared to the American one, which controls inflation by allowing money to flow to the rest of the world when interest rates rise. Europe faces the need to offset rising raw material costs for its industrial and manufacturing base. The dollar will strengthen against the euro due to the Fed’s decisions. For countries in transition like Italy, this means an increase in relative commodity costs as the euro follows the Fed at this stage when the ECB is less strong than the dollar Interest rate hikes, problems with industrial production, and citizens’ income management due to inflation, thereby stalling GDP growth. From this perspective, “there is also more positive news: to really push the economy into recession for all of 2022 (one account is quarter or two, another all year) will require a much heavier shock than the current one , appreciate for example JP Morgan that if oil also hit $150 a barrel (just over $100 today) and stayed there for the whole quarter, global economic growth would fall to 0.9% in 2022 from the prewar forecast of 4.1%
However, it is currently feared that the downward trend in the global economy will lead Rome into a technical recession (two consecutive quarters of economic decline) as early as the second half of the year. And if we think that the National GDP Covid has taken a new hit, having yet to absorb the effects of the Great Recession, we can understand what this means. We can endure one, at most two quarters of stagnation or economic decline with the guarantee that it is a temporary case. However, we cannot tolerate a return of the economic collapse trend in terms of output and growth. To the Antonio Cesarano from Intermonte Sim, where he is chief global strategist, two quarters of negative or zero growth would push annual GDP growth for Italy to 1.8% to 2%, a trend more than halving compared to 2021 forecasts.
Mauro Bottarelli On Il Sussidiario, the question formulates a “combination that seems hellish for countries with high levels of debt in the eurozone such as Italy: “ECB purchases expected to end by June 30 and inflation spiraling out of control with a second quarter at minimum wage and sanctions against Russia , which are already driving up energy and farm and food costs sharply, as prices and supermarket shelves already testify”. All forecasts of the economic growth estimates of the last few months seem to be out of date, and for the time being analyst groups (such as Bloomberg), banks (from Credit Suisse to Jp Morgan), governments and supranational institutions cautious and do not want to draw extreme conclusions.
However, everyone agrees what could be the decisive shock that would trigger a new period of economic recession and high inflation comparable to that of the 1970s: an economic war with Russia, culminating in an energy supply shock. David Tabarelli, The president of Nomisma Energia and economics professor at the University of Bologna, in an interview with Il Messaggero, emphasizes that in the event of a complete shutdown of Russian gas taps, “prices would skyrocket, since the gas coming from all over Europe would exceed €300 per megawatt hour and fuel would be added: gasoline is risked at €3, oil between $200 and $300 per barrel. Inflation would go well over 14%. We can’t hurt each other that much. The choice “to continue sanctions to the utmost” is political, but we must know the price”. For Italy, Credit Suisse stresses that an unbalanced cut in Russian gas supplies to Italy would shave 3% of national GDP from growth. We speak of nightmare scenarios that are no longer just academic hypotheses, but categories of the possible, and they show the explosiveness of the situation, which is raising the winds of a new one from the global to the national level Global recession.