[Asia Economy Reporter Lee Ji-eun] Bloomberg reported that the so-called 'Pizza Shock' has hit Italy as food ingredient and energy prices have surged due to the aftermath of the Russia-Ukraine war.
On the 26th (local time), Bloomberg converted the cost of making a Margherita pizza into an index to calculate the perceived inflation rate experienced by the Italian people. It combined the cost of Margherita pizza ingredients and the pizza's selling price to serve as a gauge for inflation in everyday life. The index included not only the prices of food ingredients such as cheese and flour but also electricity consumption and energy charges required for cooking.
According to statistics, the cost of cooking one Margherita pizza in Italy in December last year increased by 30% compared to the previous year. This figure far exceeds Italy's December inflation rate of 12.3%. Bloomberg explained, "This means that despite the Italian government spending 75 billion euros (100.4377 trillion won) to support citizens' energy bills, the financial hardship experienced by ordinary people remained significant."
Specifically, excluding energy prices, the items with the largest cost increases were cheese and flour. The price of cheese rose by 27% year-on-year, and flour increased by 22%. Cheese and flour are commonly consumed foods in Italian households. In particular, the price of flour reached its peak early last year due to the impact of Russia's invasion of Ukraine, and although it has stabilized, it is expected to show significant volatility this year as well. This is because it is uncertain whether the grain export agreement between Russia and Ukraine can continue.
In this situation, Italy's economic outlook is not very bright this year either. The United Nations Department of Economic and Social Affairs (UN DESA), along with other UN agencies, predicted in the 'World Economic Situation and Prospects 2023' report that Italy will experience a mild recession this year. Italy's economic growth rate for 2023 is forecasted at -0.3%.
Debt burden is also weighing down Italy's economy. Currently, Italy's national debt ratio to Gross Domestic Product (GDP) exceeds 145%. Major foreign media reported on the 2nd that, based on a survey of 101 economic experts, the majority identified Italy as a potential flashpoint that could explode at any time during the European Central Bank (ECB)'s interest rate hike process. Italian Prime Minister Giorgia Meloni has pledged to significantly reduce the fiscal deficit, but Italy's 10-year government bond yield rose to 4.127%, 2.3 times higher than the same period last year.
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