- Economy grew 0.3% in 1st quarter, while euro-area average 0.5%
- Government debt reaches 2.23 trillion euros, highest recorded
Italy’s economy expanded in the first quarter, while still leaving growth well below the euro-area average as government debt hit a record-high 2.23 trillion euros ($2.53 trillion) in March.
Gross domestic product rose 0.3 percent in the first three months of the year, Rome-based statistics agency Istat said in a preliminary report on Friday. That matched the median estimate of 18 analysts in a Bloomberg survey. GDP was up 0.5 percent in the first quarter in the euro area, according to a separate report.
“We need to stress that Italy is lagging behind other euro-zone economies, in particular France and Germany which beat estimates, and Spain which confirmed strong growth despite the political uncertainty,” said Mirco Bulega, economist at Edmond de Rothschild in London. He added that Italy’s slightly positive performance was favored by renewed weakness in oil prices at the start of the year and European Central Bank’s expansionary monetary policy stance.
Italian GDP expanded 1 percent from the same quarter of 2015, Istat said. The statistics agency revised fourth-quarter GDP growth upward to 0.2 percent from the 0.1 percent previously reported.
In a separate report, the Bank of Italy said Friday that general government debt grew from 2.21 trillion euros in February. Italy’s debt-to-GDP ratio is the second-highest in the euro area after Greece.
Improvements in employment and consumer demand supported Italy’s return to growth in 2015, though the economic expansion progressively slowed during the year. In April, Istat said that the recovery may cool this quarter amid weak price dynamic and industrial output.
Production was unchanged in March with all industries except energy and machinery declining in the period.
Still, Loredana Federico, lead Italy economist at UniCredit Bank in Milan, stressed in a note that the first quarter had “one of the fastest paces of expansion for Italy over the last five years” for the nation’s GDP.
“Under the conservative assumption of flat growth over the remaining three
quarters of the year, Italy should be able to grow at the same pace in 2016 as
it did in 2015,” she wrote.
Italian banks have about 360 billion euros gross amount of non-performing loans. Bank of Italy Governor Ignazio Visco said last week that while some of the country’s bankers made mistakes or even committed crimes, the bad-loan problem is mainly due to a 25 percent plunge in industrial output in the six years through 2014.
Italy’s GDP remains about 8 percent below its pre-crisis peak reached in 2007. The 19-nation euro region has regained that level with its main economies, France and Germany, that have long surpassed it.
Germany’s GDP rose a seasonally-adjusted 0.7 percent in the first quarter, the fastest pace in two years, according to a report issued Friday by the Federal Statistics Office in Wiesbaden.
Earlier in May, the European Commission cut Italy’s growth projection for 2016 to 1.1 percent from 1.4 percent. The EU executive arm also said that, following the revision and the weak prospect for inflation, Italy will fail to reduce this year its debt ratio of GDP, the euro region’s second-biggest after Greece.