Italy Recovery From Slump Seen Continuing Slowly but Surely

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  • Almost four out of five don't see new recession soon: survey
  • January industrial production rose most since August 2011

Italy’s economy will keep recovering from recession slowly but surely and avoid a renewed slump this year and next, a Bloomberg survey of analysts showed.

The euro region’s third-biggest economy will extend the expansion that started last year, said 19 of 25 respondents in the poll published Tuesday. Still, the pace of growth in 2016 and 2017 will be slower than previously anticipated, according to the median forecast of economists, strategists and portfolio managers.

The recovery “will consolidate but at a slow process, with Italy under-performing both Spain and Portugal,” Alan McQuaid, chief economist at Merrion Capital in Dublin, said in his survey response. “Lack of real economic and structural reform will hamper the recovery, with much depending on whether Prime Minister Matteo Renzi manages to inject some meaningful fiscal stimulus into the economy.”

Gross domestic product is seen increasing 1.1 percent in 2016 and 1.2 percent next year, the survey showed. That’s down from 1.2 percent and 1.4 percent respectively in a poll last month. The economy grew last year at a slower pace than it did after the previous slump in 2009 under then-Premier Silvio Berlusconi.

In January industrial production increased more than twice the economists’ forecast, signaling that the recovery from the longest recession since World War II may continue. Output rose 1.9 percent from December, marking the biggest monthly increase since August 2011, national statistics bureau Istat said. On the same day as the report, employers lobby Confindustria warned that production might have fallen again in February, recording an estimated 1 percent drop.

‘Near Term’

“We do not expect any recession in the near term,” said Thomas Gitzel, chief economist at Liechtenstein’s VP Bank AG. Recent data and leading indicators “signal a solid development of GDP growth rates.”

The Bloomberg survey was conducted from March 4-11.

Italian executives have grown pessimistic about the economic outlook. Business confidence fell last month amid concerns GDP may fail to pick up after rising last year at a progressively slower pace amid weakness in global demand.

“Italy is, and has always been, a play on the global cycle, given the relative importance of its export sector,” Gianluca Sanna, senior economist at Banca Monte dei Paschi di Siena SpA in Milan, said last month as part of a related Bloomberg survey. “Wherever the global economy goes, Italy will follow.”

The country’s unemployment rate was unchanged in the fourth quarter from the previous three months at 11.5 percent, the statistics bureau said March 10. That compares with a high of 12.8 percent at the start of 2014, but it is still almost twice the rate it was in mid-2007, when the country entered the previous recession.

In January, Italy’s public debt rose to 2.19 trillion euros ($2.43 trillion), the country’s central bank said on Tuesday. Lower than expected growth and weak price dynamic would make it difficult for Renzi and his government to start reducing the ratio of debt to GDP this year, a target he and his Finance Minister Pier Carlo Padoan agreed on with the European Union.

In 2015 the debt ratio increased to 132.6 percent, remaining the euro region’s second-biggest after Greece.