Half-yearly financial Report at June 30, 2013 - A2A

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Half-yearly financial report at June 30, 2013Macroeconomic scenariodownwards. Among the main risks that may effect the recovery are the possibility thatinternational demand will be weaker than forecast and the effects of a slow or insufficientimplementation of structural reforms in the eurozone. In the advanced countries therecovery will continue at heterogeneous rates in 2013 and 2014. In particular, it is expectedthat this will proceed at moderate rates in the United States due to the gradual expansion ofdomestic demand as the result of favorable monetary and financial conditions, a gradualimprovement in the labor and housing markets and the slow release of the braking caused bythe budgetary restructuring process. A strengthening of economic expansion is expected tobe seen in the emerging countries for the current year with an acceleration in 2014, due to apick-up in demand in the advanced countries and the continuation of favorablemacroeconomic conditions associated with low interest rates, significant capital flows fromabroad and the high price of raw materials.According to the IMF’s forecasts growth of global GDP in real terms will reach 3.3% in 2013, inline with the previous year, and will rise further in 2014 to 4%. A positive contribution to globalexpansion will arrive from the USA, where an increase of approximately 1.9% in GDP is beingforecast, and from Japan (+1.6%). In the eurozone on the other hand, economic activity is likelyto fall, with a decrease of 0.4% in GDP forecast for 2013: a turnaround in this trend is notexpected to be seen before the second half of the year, continuing to a limited extent in 2014(+1%), held up by the favorable effect on exports of the gradual increase of external demandcompared to a modest improvement in domestic demand.189The euro has slightly appreciated over the past three months in a situation of low volatility,rising by a small amount to 1.32 €/$ in June, close to the rates ruling at the beginning of the year.The average exchange rate for the second quarter of 2013 was 1.31 €/$ compared to 1.28 €/$ inthe same period of the previous year. This appreciation is the result of the recent decision ofthe European Central Bank (ECB) to keep interest rates unchanged after the reduction madein May. On the basis of the existing consensus and the figures obtainable from the forwardmarkets, an average exchange rate of 1.30 €/$ is expected for the whole of 2013, with a small fallto 1.29 €/$ in the second half of the year, against the risk of a further cut in interest rates by theECB and a more dynamic performance expected for the US economy compared to that of theEuropean Union countries.Inflation fell to 1.2% in April in the eurozone and then rose again to 1.4% in May, with a widedivergence existing between the various European countries. The fall is greater than expectedand to a large extent is due to changes in the energy component. Food products had a modesteffect on overall trends in retail prices. The ECB’s preliminary forecasts show that inflation willclose at 1.4% in 2013, with a sharp reduction over the 2012 figure of 2.5%, reflecting theconsiderable fall expected to be seen in international raw materials prices.
Half-yearly financial report at June 30, 2013Macroeconomic scenarioAs far as Italy is concerned, Istat’s preliminary figures do not indicate any improvement overthe beginning of the year: industrial production is expected to fall by around 1.4% in thesecond quarter of 2013 compared to the same period of the previous year. On the assumptionof a less unfavorable contribution coming from other sectors, a further fall in GDP of 0.6% isexpected compared to that of the first quarter. As far as retail prices are concerned, Istat’sprovisional figures point to an inflation level of 1.1% for Italy in the second quarter of 2013,essentially stable and representing a considerable reduction over the average figure of 1.9%for inflation in the first quarter of 2013.190As far as future prospects are concerned the fall in GDP which began in the third quarter of2011 is likely to continue, with a more limited intensity, at least until the third quarter of 2013,on the assumption though that political stability and a favorable international cycle arenecessary conditions for moving out of the recession. During the year households are likely toexperience a further reduction in disposable income, with the inevitable negativeconsequences on retail spending compared to the previous year. The deterioration inpurchasing power is only likely to come to an end in 2014. A pick-up in the propensity to investby businesses appears rather improbable due to the minimum levels of capacity being usedand the continuing weakness in domestic demand. Net foreign demand remains the mainsource of support for economic growth for the current year. In 2014 an improvement inliquidity as the possible result of the settlement by the public sector of its business debts couldencourage a pick-up in private investment.On the basis of the factors discussed above, Istat sees a fall of an average of 1.4% in Italy’s GDPin 2013, due to the considerable negative contribution of domestic demand (-2% excludingstocks over 2012) being only partially offset by net foreign demand (+1.1%). The IMF isexpecting to see negative growth of 1.5% for Italy in 2013, only slightly better than the OECD’smore pessimistic forecast (-1.8%) while the forecast of the main economic institutions andbanks in June was a fall of 1.6% on average. There is a high risk of a downwards revision of theseestimates precisely due to the not so very encouraging signs coming from the second quarterof the current year. Forecasts for 2014 converge on the possibility of growth slightly abovezero for the country (+0.7% according to Istat, +0.4% according to a consensus of economicinstitutions and banks, +0.7% according to the Bank of Italy, +0.5% according to the IMF). Theforecasts for inflation calculated by Istat point to a rise of 1.8% in the retail price index for 2013,one percentage point lower than the figure for 2012.
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Half-yearly financial Report at June 30, 2013 - A2A

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