Italy’s fourth recession since 2001 will last longer than previously forecast and the economy will contract 1.1 percent next year, employers’ lobby Confindustria said in a report.
Confindustria in September had forecast the economy would shrink 0.6 percent in 2013. The group raised its outlook for this year, saying the economy would shrink 2.1 percent rather than a previously predicted 2.4 percent. The outlook is further darkened by prospects for elections as soon as February, according to the report.
“Italy is still immersed in a deep contraction of internal demand and production, in which it fell without having even remotely recovered from the damages of the preceding ones,” Confindustria said in the report released today at a conference in Rome. “The horizon is further clouded by the uncertainty of the outcome of the upcoming election deadline.”
Italy’s economy shrank for a fifth quarter in the three months through September as slumping household spending pushed the recession into a second year. The unemployment rate is at a 13-year high 11.1 percent as businesses shun hiring.
Confindustria President Giorgio Squinzi said that while Prime Minister Mario Monti has done well in improving the country’s finances and calming investor concerns about Italy, the government has not done enough to stimulate growth. He called for corporate tax cuts as well as a reduction in levies on personal income for the lowest earners.
Since taking power in November 2011, Monti passed public spending reductions and tax increases aimed at containing public debt of more than 120 percent of gross domestic product. The policies deepened Italy’s fourth recession since 2001 as they weighed on demand, the Bank of Italy said in October.
The lack of growth won’t allow for a decline in unemployment, Enrico Giovannini, head of statistics institute Istat, said at the Confindustria conference. Bank of Italy Director General Fabrizio Saccomanni said at the same event that the recession won’t end before late next year.
The current macroeconomic context is still “difficult” and has negative effects on banks and their ability to lend to households and businesses, Saccomanni said.
Italy’s political situation remains “delicate” after former Prime Minister Silvio Berlusconi withdrew his support for Monti’s government, Squinzi said. Monti announced his intention to resign as soon as this month. Elections will probably be held in February, Interior Minister Anna Maria Cancellieri said yesterday.
“I personally think we’ll have an economic recovery only at the end of next year,” Enel SpA Chief Executive Officer Fulvio Conti, a deputy president of Confindustria, said at the presentation. “As we approach elections, the commitment of companies and banks must be matched by a clear political agenda to lead the country toward a new time of economic growth.”