Economic Bulletin No. 4 - 2021

The global recovery continues but supply constraints emerge

The global recovery continues at a strong pace, although there are uncertainties over the progress of vaccination campaigns and the spread of new variants of the virus. The tensions that have emerged over supplies of commodities and intermediate inputs are partly due to the rapidity of the recovery; however, they could affect prices for longer than initially expected.

ECB monetary policy remains expansionary 

In the euro area, the significant rise in inflation is attributable to the increases in energy prices, including of natural gas, and to temporary factors. The key determinants, especially wage growth, have not so far pointed to high inflation persisting in the medium term. The ECB Governing Council has confirmed its strongly expansionary stance on monetary policy: it has reiterated that maintaining favourable financial conditions is essential to support the recovery.

Growth exceeds expectations in Italy

In Italy, the increase in GDP, which in the spring was much higher than anticipated, is likely to have exceeded 2 per cent in the third quarter as well. Wider vaccination coverage and the increase in mobility have allowed households' consumption of services to resume, which has accompanied the ongoing recovery in firms' investment. The improvement in the economic situation has translated into a rise in employment, especially in fixed-term contracts; however, the effects of the pandemic crisis have not been entirely overcome. Based on our current assessments, GDP growth in 2021 will be around 6 per cent, higher than was estimated in July's Economic Bulletin.

Energy costs drive up inflation

Inflation reached 2.9 per cent in September. Nevertheless, there are no signs as yet of a strong upturn in wage growth and, despite having revised upwards their growth expectations for their selling prices, firms indicate rises of less than 2 per cent a year.

The public accounts are expected to improve in 2021 compared with the previous year

The Government has updated the current legislation estimates and the budget objectives for the next three years. In contrast to what was planned in the spring, the new scenario foresees an improvement in the accounts this year compared with 2020. The ratios of net borrowing and debt to GDP will continue to decline gradually over the next few years, though by less than expected in the current legislation scenario owing to expansionary measures that will be set out in the next budgetary package.