Energy inflation: that’s what the stagflation nightmare is
With the slowdown of the economy, the risk is to ending up in “stagflation”, i.e. rising prices and below-zero growth.
According to government estimates for 2023, out of an expected growth of 0.6%, 0.3% comes from the Pnrr, while the other 0.3% from the manoeuvre. In short, Italy would be in stagnation without these inputs. All while Italian inflation remains at 12.6%. According to Confartigianato, the risk for Italy is to fall into the nightmare of stagflation, a combination of recession and inflation. Italy’s high inflation is caused by rising energy prices. In November, the electricity price index in Italy rose by 174.8%. The highest inflation ever recorded in the whole EU. Gas prices in Italy rise by 96.5% compared to 67.0% of the European average. However, the trend in energy prices also endangers the competitiveness of Italian companies.
The tightening by global central banks, together with the resurgence of Covid in China, is deflating international energy and commodity prices. The latest Istat data relating to foreign trade, in fact, show a drop in the energy bill due to a decrease in demand and import prices. In October, the value of energy imports increased by 57.5% compared to +145.1% in September. A figure that depends on the halving of the growth in prices and the reduction in imported volumes.