Summary
In 2022, following the exceptional recovery of the previous year, the Italian economy grew robustly in all areas of the country. The expansion was stronger in the North-East and in the Centre. Nevertheless, in the first half of 2023, according to the Bank of Italy's quarterly indicator of regional economic activity (ITER), growth faded in all macro-regions, reflecting the slowdown in domestic and foreign demand. Investments have weakened, despite being supported by the incentives under the National Recovery and Resilience Plan (NRRP); going forward, sales are expected to hold stable. In the first six months of 2023 employment continued to rise, more so in the central and northern regions. Inflation, although decreasing from the beginning of the year, has eroded households' disposable income, thereby curbing their consumption. The loss in purchasing power was greater for households with a smaller spending capacity, especially in the North-East and Islands. Rising prices have increased the risk of energy poverty, which is more widespread in the southern regions. While bank lending to firms decreased, loans to households slowed down. Banks became more selective in loan granting, due to higher funding costs and a weaker economic outlook. The loan default rate remains still low everywhere. Public investments have increased and are set to strengthen as the NRRP is implemented.
