Dopo due anni di stagnazione, riteniamo che la crescita economica in Italia risulterà assai modesta anche nel 2004. La performance della nostra economia dovrebbe risentire della debolezza dei consumi privati, mentre è probabile che gli investimenti tendano a stabilizzarsi dopo un 2003 molto deludente. La dinamica delle scorte e dal canale estero dovrebbero fornire un contributo negativo alla crescita totale. Dopo un primo semestre di espansione relativamente debole, una timida accelerazione è prevista per la seconda metà del 2004.

I consumi delle famiglie risentiranno del calo di fiducia che è in atto dal 2002, ma che si è accentuato recentemente a causa dei ben noti scandali societari. Le preoccupazioni per l'andamento dei bilanci familiari sono però anche dovute al fatto che le retribuzioni nominali crescono meno del tasso di inflazione, e così il reddito reale disponibile dei consumatori decresce con il tempo. Inoltre, il fatto che il tasso di risparmio sia già sceso notevolmente nel corso degli anni '90 limita le possibilità di slegare il profilo dei consumi dall'andamento del reddito da lavoro. E' così naturale che la spesa delle famiglie si aggiusti ora su livelli più contenuti.

Nonostante le indicazioni incoraggianti che provengono dai PMI e il recente miglioramento della fiducia delle imprese, la produzione industriale del primo trimestre del 2004 è risultata in calo dello 0.5% su base trimestrale. In una fase di estrema debolezza della domanda interna, il supporto dell'export si rivela decisivo per mantenere la crescita su livelli positivi, seppur modesti. In quest'ottica, il recente indebolimento dell'euro dovrebbe rivelarsi un fattore positivo nei prossimi mesi.

L'inflazione italiana nei prossimi mesi dovrebbe attestarsi intorno all'attuale 2.3%. In prospettiva, prevediamo una leggera discesa solo verso la fine dell'estate, sempre che il prezzo del petrolio non rimanga a lungo sui livelli attuali. Riteniamo che il tasso di inflazione non dovrebbe scendere sotto il 2.0% su tutto l'orizzonte previsivo, cioè fino a fine 2005.

Il Governo ha recentemente rivisto all'1.2% la crescita prevista per il 2004, con un conseguente innalzamento del target di deficit/PIL al 2.9%. I primi quattro mesi del 2004 hanno fatto registrare un fabbisogno ben superiore allo stesso periodo del 2003, e le prospettive per la finanza pubblica non sono incoraggianti. L'avvicinarsi di importanti scadenze elettorali ha fatto passare in secondo piano il tema delle riforme strutturali (riforma delle pensioni in primis) e ha portato alla ribalta proposte di ingenti tagli fiscali. Date le nostre previsioni di crescita e lo scarso margine di manovra che si prospetta per il Governo, riteniamo che l'obiettivo di deficit/PIL inferiore al 3% non verrà rispettato tanto nel 2004 quanto nel 2005. Di conseguenza, è probabile che il rating dell'Italia subisca una riduzione in tempi relativamente brevi, forse già da questa estate.

Recent activity data confirm that growth will fail to pick up significantly in H1-04, and we confirm our 0.8% GDP forecast for 2004. Consumer confidence remains at record lows, reflecting low productivity and wage growth; as private savings have already declined considerably, private consumption is set to remain muted. We see inflation stabilizing just over 2% after the summer, with risks skewed to the upside. We continue to flag the risk of a rating downgrade, already well recognized by the market, due to a worsening public finance outlook and slow progress on key structural reforms.

When we lowered to 0.8% our forecast for 2004 Italian GDP growth, we stressed that subdued household consumption would be the weak spot on the road towards recovery. Ever since, consumer confidence and retail sales data have shown little evidence that our call for household spending growing less than 1% could turn out too pessimistic. Furthermore, industrial production has once again disappointed in Q1, as soft private consumption coupled with a strong currency dried up nearly every source of demand. Supported by evidence arising from hard data, we confirm our view that growth, after stagnating in Q4-03, will fail to pick up significantly in H1-04, given also the current drag from net export and the need to deplete the high level of inventories built up throughout 2003.

As a matter of fact, according to our forecasts, both inventory accumulation and net trade should contribute negatively to 2004 GDP growth, the most relevant effect being displayed in the first two quarters of the year. Fixed investments, on the other hand, are bound to display some sort of improvement after contracting by 2.1% in 2003. The pace of the recovery will likely accelerate closer to the trend level only in the second part of 2004. Our baseline scenario for H2-04 sees consumer sentiment and spending stabilising somewhat, while the recent euro depreciation and resilience in world growth should provide support to economic activity fostering a mild increase in export and a gentle upswing in investment spending.

Following the recent revision of quarterly national accounts, the outlook for private consumption has worsened considerably. In fact, household spending was reported down 0.4% in Q4-03 with respect to the previous quarter and up by a mere 1.2% in 2003. As far as Q1-04 is concerned, only January and February retail sales numbers (in value terms) are available at the moment and they display the typical effect of hard seasonal sales, with January's 0.6% gain almost totally offset by February's 0.4% decline. Overall, the latest revised quarterly data are now more consistent with falling consumer confidence as measured by the ISAE index, which displays a clear downward trend starting from the beginning of 2002. After dropping below the 100 threshold in January on the wake of domestic corporate scandals, sentiment failed to rebound in a convincing manner and thus, standing at 101.7 in April, remains close to history-low levels.

Among confidence's main sub-components, the most hardly hit were those related to households' balance sheets and particularly the possibility of future savings. Although this doesn't come as a surprise, what makes the underlying worsening trend in sentiment worrisome is that it can be traced back to well known structural problems. Subdued wage growth is probably the most relevant one, as improvements in labour market conditions (at least if measured by an all-time low unemployment rate) are not enough to offset the declining trend in productivity. This causes gross salaries to grow less than inflation, thus households' real labour income (and consequently real disposable income) decreases with time. Throughout the 90's, a declining saving rate has worked as a financial buffer allowing households to smooth consumption across the business cycle, independently from the dynamics of real disposable income. Now that private savings have already decreased considerably, such a support is no longer in place (at least to the same extent), and personal spending is set to adjust on a more subdued path.

On the production side, following the negative performance recorded in Q4-03, 2004 started off on a weak note. In fact, both January and February industrial production data (respectively –0.3% and 0.0% on a monthly basis) point to a further contraction in the sector's output in Q1-04. This outcome is partly a natural consequence of the massive inventory accumulation recorded in Q4-03, when stock rebuilding alone contributed 0.6 percentage points to quarterly GDP growth. Such accumulation was probably not planned by firms, but was the result of weaker-than-expected household spending (-0.4% on a quarterly basis). As the pace of the Eurozone recovery stalls and business expectations need to be scaled back, demand tends to be met by running down inventories exceeding the desirable level, and production unavoidably slows down. A more detailed breakdown referred to the first two months of the year shows that the most significant decline in industrial production involves the investment goods component, while strong numbers in the energy sector have kept the headline index from falling even further.

The lack of recovery in industrial production so far has not proved consistent with positive indications arising from manufacturing PMIs, steadily above the 50 threshold since October 03. Nonetheless, April PMI index at 52.5 – the highest since March 02 – and the unexpected rebound in April ISAE business confidence indicator (up to 96.5 from 93.6), hint at the possibility that the outlook for H2-04 could turn out a little more upbeat with respect to the first part of 2004. It's worth noting, though, that most of the improvement in the ISAE business sentiment was related to foreign orders, thus confirming that a strong external support is still crucial at the present stage of the business cycle, given prolonged weakness in domestic demand. In such an environment, solid activity in the US and Asia coupled with a lower and more stable euro are key to foster a decent pick up in the pace of growth.

After averaging 2.7% in 2003 and entering 2004 on a declining trend, NIC inflation rate in the last three months has displayed a clear stabilization around 2.3%. Notwithstanding a remarkable downward contribution stemming from the communication component (due mostly to decreasing mobile phones prices), inflation has failed to fall further, partly as a consequence of one-off tax increases (as it was the case with March tobacco tax hike), partly because of stubbornly high oil prices.

In our forecasts, the current inflation level should persist well into the summer, when we see the beginning of a slight downward movement that will take inflation closer to 2%. Further out, we think the yearly change in consumer prices will remain broadly stable at or just above 2%. Throughout the forecast horizon (December 2005), we never see the inflation rate breaching downward the 2% threshold. It's worth noting that this is by no mean a worst-case scenario. The dynamics we foresee at present is in fact strictly dependent on the evolution of the transportation component, which includes most of the energy-related costs. Indeed, should the euro-denominated oil price fail to ease somewhat from current high levels, then we would be forced to revise upwards our inflation path. This is the reason why, overall, risks to our inflation scenario are skewed to the upside.

In line with the numbers provided by the IMF, in its quarterly update on public finances the Italian Government trimmed to 1.2% (from 1.9%) its forecast for 2004 GDP growth, and concurrently the deficit/GDP target was raised to 2.9% from the previous 2.2% (notice that the European Commission, while seeing 2004 GDP growth at 1.2%, foresees the deficit/GDP ratio will edge up to 3.2%). Up to April, net cumulative budget deficit was 38.0bn, well above the 33.0bn recorded in April 2003, as the first three months of 2004 displayed markedly worse performances with respect to last year's outcome.

Looking further ahead, there are reasons to think the broad picture could worsen further. The approaching electoral round contributed to the waning in structural reform momentum (most notably the pension reform), while the tax cut debate has made its way through (the latest projection points to a potential 12bn – 1% of GDP - fiscal stimulus). Given our growth forecasts and the government's tax cut proposals, it seems likely that Italy could exceed the 3% threshold both in 2004 and 2005. There's a considerable risk that such scenario of worsening fiscal prospects and lack of progress on structural reforms, if confirmed, could trigger a downgrade in Italy's creditworthiness, possibly as early as this summer—a risk which is already well recognized by the markets.