Recession Risk

Estimates

War in Iran, S&P cuts Italia growth to 0.4% and ECB forecasts inflation at 3.1%

The conflict is estimated to reduce world GDP growth in real terms by 0.4 percentage points over the next two years

2 April 2026

3' min read

Translated by AI

Versione italiana

Key points

ECB estimates: higher inflation and downward growth
Panetta's speech on risks to financial stability

3' min read

Translated by AI

Versione italiana

The crisis caused by the war between the United States and Israel and Iran will hit Europe hard, and Italy will pay the highest price.

In 2026, in fact, our country's growth forecast has been diminished, from + 0.8% in the first expectations to + 0.4% today.

These are the estimates of the new Global Economic Outlook of Standard & Poor's, which also revised downwards the outlook for Great Britain and the euro area as a whole.

London will stop at a growth of 1%, compared to the + 1.4% predicted at the outset, while the eurozone loses two decimal points, standing at + 1% against + 1.2% before the outbreak of the war.

Germany (expected growth of 0.8 % with the fiscal stimulus) and France at + 1.9 % held up.

ECB estimates: inflation higher and growth down

The European Central Bank had already warned about the impact of tensions in the Middle East in its economic bulletin. According to the ECB, rising energy commodity prices will push inflation 'above 2% in the short term'.

For the second quarter of 2026, a brusque rise to 3.1% is expected, while in the third quarter inflation will fall to 2.8% after the decline in energy commodity prices implied by the prices of futures contracts.

Moreover, in line with the new S&P forecasts, the ECB warns: 'The latest available data are consistent with modest GDP growth in the first quarter of 2026'.

If, before the war, the world economy was showing 'signs of resilience', now 'the erosion of real income and the resulting deterioration in confidence could weigh heavily on private consumption,' the ECB writes, 'the strength of these effects will depend on the intensity and duration of the conflict.

According to ECB experts, global GDP growth in the next two years will decline in real terms by 0.4 %, and in 2026 it will stand at + 3.3 % compared to + 3.6 % in 2025.

The impact of the war in Iran "offset the positive carry-over effects from the higher-than-expected growth at the end of 2025 and the moderate boost provided by the fall in US tariffs".

Furthermore, overall inflation as measured by the global consumer price index was revised upwards over the next two years, due to the energy price shock.

Panetta's speech on risks to financial stability

As far as Italia is concerned, the governor of the Bank of Italy Fabio Panetta spoke today in his speech at the 16th Annual Conference of the Bank of Italy and the Ministry of Foreign Affairs and International Cooperation. Panetta spoke about the current geopolitical tensions, in particular the conflict in Iran.

"Tensions in energy markets are worrying not only for the immediate impact on inflation and growth, but also for the possible repercussions on financial stability. With high volatility and uncertainty, pre-existing fragilities could turn into channels for shock amplification".

"The picture," Panetta emphasised, "is made more delicate by the high levels of public debt in many economies, which limit the room for budgetary intervention and increase the risks for the financial markets.

Changes in global investors' perception of risk can thus quickly translate into tensions in sovereign bonds and capital flows'.

Panetta, in view of the energy crisis and the ongoing geopolitical crisis due to the war in Iran, urges the markets to maintain the good perception 'of the resilience of Italy's public finances', which 'has kept us safe until now'.

The governor recalled "the high levels of public debt in many economies, which limit the room for budgetary intervention and increase risks for the markets.

Changes in global investors' perception of risk can thus quickly translate into tensions in sovereign bonds and capital flows'.