Def, from the 100-point increase on the Btp to the rate variable: all risk scenarios
The government examines possible risk elements associated with heightened geostrategic tensions and increased global fragmentation, starting with the effects on international trade
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Key points
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A scenario in which the rate of the ten-year BTP was 100 basis points higher than indicated in the Def would see about half a percentage point of growth erased between 2025 and 2027. This is one of the adverse scenarios within a risk analysis of the Def, under the assumption of a credit crunch to the economy linked to rising BTP rates. The impact would stop at -0.1% on 2024 GDP, rise to -0.4% on 2025 and to -0.5% on 2026 and 2027. The other risk scenarios considered concern a global trade squeeze, commodity prices, and the exchange rate.
Tensions in the Middle East and less lively world trade
.The first risk scenario concerns a less buoyant evolution of world trade weighed on Italy as a result of various factors linked to a sharpening of geopolitical tensions in the Middle East, resulting in an expansion of hostilities to neighbouring countries. The extension of the conflict to the Red Sea, the government document recalls, has already caused a significant increase in the price of container transport on the Asia-Mediterranean route.
The amplification and prolongation of the crisis would lead to a structural drop in transits through the Suez Canal , with a greater negative impact on the trend of international trade, particularly for countries such as Italy, which overlook the Mediterranean. A further factor that could slow down foreign trade is the possible weakening of Chinese domestic demand due to the difficulties in the real estate sector. Considering these risk factors leads to the assumption of a slowdown in world trade in 2024 and 2025 compared to the baseline scenario. In particular, trade-weighted foreign demand with Italy would grow by 1.4 per cent in 2024 (instead of 1.9 per cent) and by 3.4 per cent in 2025 (instead of 4.4 per cent). Thereafter, foreign demand growth would pick up, with a rate of change of 4.4 per cent in 2026 and 4.1 per cent in 2027 (instead of 3.9 per cent and 3.3 per cent, respectively), which would bring volumes back to the same levels as in the baseline scenario during 2027.
In the scenario with less buoyant world trade, the GDP growth rate would be lower than in the reference scenario by 0.1 pp. in the current year and 0.3 pp. in 2025. The vigorous recovery in world trade from 2026, bringing it back to the levels of the reference scenario in the third quarter of 2027, would result in GDP growth that is 0.1 pp. higher than in the reference scenario by 0.1 pp. in 2026 and 0.2 pp. in 2027.
Rise in energy commodity prices
.The second scenario envisages a price development of energy commodities (especially oil and natural gas) that is less favourable than assumed in the reference scenario, with new and sudden increases in oil and gas prices. These would be linked to negative developments in the current tensions in the Middle East, with their extension to the Red Sea and continuation for some time. In addition to geopolitical factors, prolonged supply cuts by OPEC+ could contribute to higher oil prices than in the reference scenario.
