By Xavier Fontdegloria

Italy's economy is expected to decelerate sharply in 2023 due to high inflation, slowing international trade flows and a tighter monetary policy, according to forecasts from the country's national statistics agency Istat released Tuesday.

The eurozone's third-largest economy is set to grow by 0.4% in 2023, down sharply from an expected 3.9% expansion in 2022, Istat said.

Investment is likely to be the main growth driver for both this year and the next one, while household consumption is set to slow sharply as high inflation weighs on consumer spending.

Italy's economy expanded by 0.5% in the third quarter compared with the previous three-month period, but economists broadly expect the country's economy to take a downturn at year-end.

"Falling consumption will drag Italian gross domestic product down over the coming two quarters, after being the main boost in the first half," Pantheon Macroeconomics senior Europe economist Melanie Debono said in a note. Pantheon expects the Italian economy to contract by 0.5% in the fourth quarter and by 0.2% in 2023's first quarter, taking the economy into a short and shallow recession.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

December 06, 2022 06:54 ET (11:54 GMT)