By Fernando Napolitano, President & CEO of NEWEST
March 3 2022
There is only one certainty in the Russia-Ukraine war: Kremlinologists have replaced the millions of Covid-19 experts in Italian media.
In the meantime, the invasion of Ukraine is still underway, Putin is threatening the nuclear option, and Russia is less isolated than we would like to think. China’s position is lukewarm condemnation, and Turkey closed access to the Black Sea to military vessels only after the Russians were already in.
Furthermore, Sergei Lavrov, Russian Minister of Foreign Affairs, declared that "The citizens … of the EU involved in supplying lethal weapons to the Ukrainian Armed Forces will be held responsible for any consequence of such action". This means that Europe is technically at war.
The world has changed, and so business needs to adapt.
Italy had a positive 2021. The general government deficit, in relation to GDP, was equal to -7.2%, compared to -9.6% in 2020. The Italian public debt fell to 150.4% of GDP in 2021 (it was 155.3% the year before). The tax burden rose to 43.4% (42.8% in 2020). 2021 GDP grew by 6.6%, but the Italian Statistical Office, ISTAT, declared that inflation rose to 4%, the eighth consecutive increase.
In 2022, however, a GDP growth of 4.4% looks arduous as war in Ukraine may impact growth. Italy’s GDP relies significantly on the export of goods and services that, typically, account for a third of its GDP. The stock exchange -- IT40-- decreased 3,047 points or 11.14% since the beginning of 2022. Prime Minister Mario Draghi in his urgent update to Parliament on the Ukrainian crisis and possible consequences of the sanctions on Russia said that "the reopening of the coal plants may be necessary to fill any immediate shortcomings.”
On the bright side, Covid 19 seems to be in sharp decline and restrictions on people’s movements will lift starting April 1. This will favor tourism at domestic and international level. As temperatures warm in Spring, energy needs will ease. The €200 billion from the European Recovery fund made available to Italy through 2026 are well underway. Incidentally, Italy’s Minister of Industry declared that the total funds that will be invested in the economy – European funds plus national funds – will total €24 billion by the end of the second quarter.
Lastly, a Europe awakening is rising to meet these challenging times, and important legislation has been announced in terms of energy, food, and, possibly, growth in scale of European industries.
NEWEST will be following closely the evolution.
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