Italian Economy Shrinks Most in Almost Four Years Before Vote

Italy’s economy contracted the most in almost four years in the quarter through December as the country’s fourth recession since 2001 deepened.

Gross domestic product shrank 0.9 percent from the previous three months, a sixth quarterly contraction and almost five times the 0.2 percent pace of the third quarter, the National Statistics Institute Istat in Rome said in a preliminary report today. The decline was more than the 0.6 percent median forecast in a Bloomberg News survey of 24 economists. From a year earlier, output shrank 2.7 percent.

Italy’s central bank has called on whichever government emerges from this month’s elections to consolidate public finances to boost competitiveness and economic growth, after revising its GDP forecast for the euro region’s third-biggest economy.

The economy shrank 2.2 percent in 2012, Istat said today. The Bank of Italy forecast the economy will contract 1 percent this year and won’t emerge from the recession until the second half of 2013, citing weak domestic demand. The central bank’s new forecast is five times the 0.2 percent contraction it estimated in July.

Economic policies are in focus before the Feb. 24-25 elections as Prime Minister Mario Monti’s austerity measures aimed at reducing public debt of 2 trillion euros ($2.7 trillion) deepen the slump.