A couple toss coins into the Fontana di Trevi in Rome, Italy, on Jan. 1, 2022. (Xinhua/Jin Mamengni)
"The recovery is happening, and unless there is some unexpected development, the worst is behind it. But the country's economy is not in the clear and it won't be for a while."
ROME, Jan. 8 (Xinhua) -- Italy's economic recovery from COVID-19 could be muted in 2022 by rising prices, especially fuel prices, economists have said.
In December, Italy's National Institute of Statistics (ISTAT) forecast the country's economy would grow 4.7 percent in 2022, slower than the agency's prediction of a 6.3-percent economic growth in 2021.
But still the prediction for 2022 is higher than Italy's growth rate of any year between 1979 and 2020, according to data from the World Bank.
The strong figures for 2021 and 2022 are mostly due to a rebound from the 8.9-percent contraction in 2020, when the country was hit hard by the COVID-19 pandemic. However, economists said that rising prices, mostly fuel prices, would erode the impact of the strong economic growth.
"Usually, if an economy grows four or five or six percent in a year, it's obvious," Javier Noriega, chief economist with investment bank Hildebrandt and Ferrar in Milan, told Xinhua. "But the impacts of Italy's growth last year and this year are much more limited."
A COVID-19 notice board is seen at Galleria Alberto Sordi in Rome, Italy, Dec. 24, 2021. (Xinhua/Jin Mamengni)
According to Alessandro Polli, an economic statistics professor at Rome's Sapienza University, the main reason for those limits is tied to rising prices.
Earlier this week, the ISTAT released preliminary data showing prices rose by 3.9 percent in 2021 compared to the previous year, pushed largely by a surge in energy prices.
Italy's energy prices rose by 29.1 percent in December compared to the same month a year ago, it said.
Polli noted that rising prices in other sectors -- whether consumer products, food, or manufactured goods -- are at least partially related to the high cost of energy, which makes it more expensive to run factories and transport goods.
"If the economy grows 6.3-percent and the inflation rate is at 3.9 percent, then the real economic growth, the real increase in spending power, is really just 2.4 percent," Polli said.
He predicted the same trend seen last year could be exaggerated in 2022, since supply chain problems are likely to grow in the coming months. Though prices did not rise much in the early part of last year, they will rise from the start of 2022, he noted.
People wait to enter a store on Via dei Condotti shopping street in Rome, Italy, on Dec.19, 2021. (Xinhua/Jin Mamengni)
Benchmark energy prices surged 30 percent across Europe earlier this week, according to media reports. Polli pointed out that Italy will be hurt by the current trends more than many other countries since it imports most of its energy.
"What we're seeing is inflation pushed by geopolitical factors, and not by rising demand," he said. "Italy's economy is largely 'transformational,' meaning it imports raw materials, makes them into something more valuable, and then exports them."
"That means the energy costs hit the process three times: when the raw materials are imported, during the production phase, and then when they're exported," he said.
Noriega said the latest developments do not mean the economy is not improving, but the impacts will be smaller at first and the recovery slower than it might appear at first glance.
On average, people will have more money in their pockets, but will not buy as much as they used to, Noriega said. "The recovery is happening, and unless there is some unexpected development, the worst is behind it. But the country's economy is not in the clear and it won't be for a while."
A woman takes photos of a Christmas tree at Piazza Venezia in Rome, Italy, on Dec. 11, 2021. (Xinhua/Jin Mamengni)■
