World Economy

No Sign of Italy’s Economic Growth

No Sign of Italy’s Economic GrowthNo Sign of Italy’s Economic Growth

There are no signs to suggest Italy’s sluggish economy will accelerate in the final months of this year, national statistics bureau ISTAT said.

Gross domestic product in the eurozone’s third largest economy stagnated in the second quarter, though most economists expect to see a return to modest growth when ISTAT releases third quarter data on Nov. 15, Reuters reported.

In its monthly economic note, ISTAT gave no forecast for the July to September period, but it said its composite leading indicator “does not signal any prospect of an acceleration in the final months of the year.”

Italian GDP expanded by 0.7% last year, less than half the rate in the 19-nation eurozone, and the government of Prime Minister Matteo Renzi forecasts a growth rate of 0.8% in 2016.

Renzi said last Tuesday he was optimistic Italy’s economy would grow by 1% this year, just a few weeks after he cut the official forecast to 0.8%.

Renzi, who is campaigning furiously ahead of a Dec. 4 referendum on a constitutional reform that he has staked his political future on, said on a television talk-show he was “optimistic that we’ll end the year at 1%”.

Earlier, Italy’s independent budget watchdog, the Parliamentary Budget Office, said it expected 2016 growth of just 0.7%. It forecast a GDP rise of 0.2% in the third quarter and 0.1% in the fourth.

The UPB created a stir this month when it refused to sign off on Renzi’s multi-year budget plan, saying the economic outlook it depicted was too rosy. Italy has a record of strongly over-estimating its official growth forecasts.

Renzi’s cabinet in mid-Oct. passed a budget law that includes a corporate tax cut and measures to boost investments in an effort to revive political support and economic prospects ahead of a key constitutional referendum in early December.

“Italy isn’t going well yet, but after two and a half years it’s going a bit better than before,” Renzi told reporters, after the cabinet approved the 2017 law that must pass the Italian Parliament by year-end. The tax cuts “are very important for small companies” and the money “isn’t going to bankers, it’s going to small and medium businesses and artisans.”

As he faces a Dec. 4 referendum that could mark the end of his government, Renzi needs to maintain the budget discipline requested by the European Commission while pushing through measures to restart economic growth.

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