Italian Economy Contracted in First Quarter, Extending Recession
Italy’s economy contracted more than forecast in the three months through March as weak domestic demand extended a recession to its seventh quarter.
Gross domestic product shrank 0.5 percent from the previous three months after falling 0.9 percent in the fourth quarter, the National Statistics Institute Istat in Rome said in a preliminary report today. The decline was more than the 0.4 percent median forecast in a Bloomberg News survey of 21 economists. From a year earlier, output declined 2.3 percent.
As exports fail to offset the effect of declining consumption and investment, Italy’s longest slump in two decades shows no sign of easing. Industrial production fell 0.8 percent in March, Istat said last week. Output in the 17-country euro region rose 1 percent in the same month, the European Union statistic office Eurostat said yesterday. Italy is probably in its eighth quarter of contraction and won’t likely exit the recession until late this year, Finance Minister Fabrizio Saccomanni said May 9.
Italy’s GDP will fall 1.4 percent in 2013 before rising 0.7 percent, Istat forecast in its May 6 annual report. Its estimates compare with projections by the European Commission for a 1.3 percent contraction this year and growth of 0.7 percent in 2014. The Organization for Economic Cooperation and Development said May 2 that Italy will shrink 1.5 percent this year and expand 0.5 percent next.
The new government of Prime Minister Enrico Letta may pass later this week several measures to spur an economic recovery after the austerity policies by his predecessor Mario Monti deepened the recession.
At a meeting on May 17 in Rome the cabinet is expected to suspend the next payment of the property tax assessed on primary residences and to renew a temporary layoff program known as CIG. Those measures are aimed at countering the slump in consumer spending could require 3.5 billion euros ($4.5 billion), newspaper Il Sole 24 Ore reported last week without saying where it got the information.
Still, the government has signalled that no budget cuts will be needed to finance its plan despite the commitments to keep the budget deficit within the EU’s limit of 3 percent of GDP and to reduce a public debt that reached a record high in March of 2.035 trillion euros.
Any budget leeway for this year and next will be used to repay part of debt the central and local administration owe to private companies, Saccomanni said last week. Under a plan passed by Monti’s government, Italy is committed to make 40 billion euros in arrear payments. Banking lobby ABI said last month that the debts may have topped 100 billion euros at the end of 2012.
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