World Economy

Fresh Concerns Over Italian Recovery

Fresh Concerns Over Italian Recovery Fresh Concerns Over Italian Recovery

Italy’s economy expanded in the fourth quarter below economists’ expectations and at the slowest pace in a year, prompting concerns that the recovery from the country’s longest recession since World War II might falter in coming months.

Gross domestic product rose 0.1% in the three months through December, Rome-based statistics agency Istat said in a preliminary report on Friday. That was below the 0.3% estimate of 22 analysts in a Bloomberg survey. GDP expanded 1% from the same quarter of 2014 while its non-seasonally adjusted growth last year was 0.7%, the report said.

“Data are weaker than what we expected and signal a potential lack of rebound in investment activity, which is a key factor in supporting a sustainable recovery,” said Giada Giani, an economist at Citigroup Inc. in London. “Growth significantly slowed down during 2015, posing downside risks to our forecast for economic growth this year.”

Industrial output in the eurozone’s third-biggest economy fell for a second month in December as companies grew pessimistic about the outlook for manufacturing activity despite limited improvements in both labor market and consumer demand. Weaker than expected GDP growth and price dynamic might jeopardize Prime Minister Matteo Renzi’s goal of reducing the GDP ratio of Italy’s public debt which climbed in November to €2.21 trillion ($2.49 trillion).

 Difficult Target

Delays in the plan for sale of state-owned assets might make that target even more difficult. On Thursday a treasury official said the government might review the plan size and content after reports saying the Italian railway company is set to postpone an initial public offering scheduled for this year.

Still, Finance Minister Pier Carlo Padoan said in an interview earlier this week that the debt-to-GDP will decline in 2016 “given the real growth and possibly given a bit more inflation, that is beyond our control of course.”

Padoan cited Feb. 4 forecasts by the European Commission saying that the ratio will drop to 132.4% this year from 132.8% in 2015, marking the first decline after eight years of growth.

The pace of Italy’s GDP quarterly expansion progressively slowed down from 0.4% in the first three months of 2015 to 0.2% in the third quarter.

 Reasons to Worry

Italy’s recovery from recession virtually stalled towards the end of 2015, complicating Italian efforts at debt reduction, worse-than-anticipated growth figures indicated on Friday.

National statistics body Istat said total GDP for 2015 was up 0.7% on the previous year.

The Bank of Italy had last month forecast an expansion of 0.8% for 2015 with growth accelerating to 1.5% in both this year and 2017, broadly in line with the government’s figures.

Istat said GDP expanded by only 0.1% from the third to the fourth quarter of last year. That produced an annualized rate of 1% in the final three months of the year, significantly below most analysts’ predictions of quarterly growth around 0.3% and an annual rate closer to 1.2%.