Italy Exports Failed to Offset Weak Demand in 2013 Contraction

Italy’s economy, the euro region’s third-biggest, contracted 1.9 percent last year as sales abroad of the nation’s goods failed to offset the effect of weak domestic demand.

Gross domestic product last year compares with a revised decrease of 2.4 percent in 2012, Rome-based national statistics office Istat said today. The 2013 contraction matched the median estimate of 10 economists surveyed by Bloomberg. Consumer spending fell 2.6 percent last year, while exports rose 0.1 percent, today’s report showed.

Italy still faces the challenge of taming the euro-region’s second biggest debt that rose last year to 132.6 percent of GDP, from 127 percent in 2012, Istat also said today. The budget deficit was unchanged at 3 percent of GDP in 2013.

Italy will expand 0.6 percent this year as consumption remains weak amid rising unemployment, the European Commission said on Feb. 25. In its previous projections released in November the commission predicted 0.7 percent economic growth. The Brussels-based commission also estimated that Italy’s unemployment won’t decline until 2015.

Italy stopped contracting in the third quarter of 2013 after a two-year contraction, the longest since World War II. GDP was unchanged in the third quarter and rose 0.1 percent in the three months through December, Istat said last month.

Joblessness in the country rose to a record high of 12.9 percent in January, signaling that companies may fail to hire even after the economy returned to growth, Istat said Feb. 28. Last week new Prime Minister Matteo Renzi pledged to overhaul Italy’s labor market during his first 100 days in office. To prompt businesses to hire and revive the domestic demand, he plans to use about 10 billion euros’ ($13.7 billion) worth of spending cuts to reduce a regional business levy and the personal income tax.

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