Italy Should Increase Exports for Economic Growth

Italy’s larger-than-expected rise in consumer prices in April could be an important signal of an economic rebound for the country’s struggling economy, but economists say Italy won’t see sustained economic growth until it sees exports increase.

Prices in April rose 1.9% in Italy compared to the previous month, the largest one-month increase in four years and a much better sign of a robust economy than the 0.5% drop in prices registered a year earlier. Economists had been predicting prices would rise a little less than 1% in April, Xinhua reported.

While high, sustained inflation can wreak havoc on a country’s economy by eroding the value of wages, economists say an uptick in inflation for a country grappling with anemic economic growth and high levels of unemployment is a good sign because it signals an increase in demand from consumers. Over time, strong demand will encourage companies to produce more goods.

“It’s a positive sign,” Giancomenico Piluso, an economist with the University of Siena, told Xinhua. “On its own, the value of this indicator is probably limited. But seeing prices rise by nearly 2% is much better than the alternative.”

According to Patrizio Tirelli, a professor of economics, quantitative methods, and business strategy at the University of Milan-Bicocca, higher prices can also have a positive impact on the government’s balance sheet.

The ISTAT, Italy’s National Statistics Institute, released the inflation figure for April also noted that Italy’s government debt reached a record high of €2.26 trillion ($2.49 trillion). But Tirelli said that if moderate inflation continues it could make the country’s massive debt more affordable.