The Italian economy is now officially in recession for a fourth time in six years, with GDP falling by 0.2pc in the second quarter of this year. The fall has taken analysts by surprise, as a poll of economists had predicted that we would see Italian growth statistics show an increase of 0.1pc in the second quarter.
The second quarter decline is an acceleration from a 0.1pc drop in GDP seen during the first three months of the year.
Today’s data serves to “underscore the fragile and sluggish nature of Italy’s recovery,” said RBC Capital Markets’ Timo del Carpio.
Six years after the financial crisis, Italian real GDP is still 9.1pc short of its pre-crisis peak...
Monthly data indicates that the fall was caused by a sharp surge in imports. That increase “may prove temporary” given the weakness of domestic demand, said Capital Economics’ James Howat.
European Commission indicators and other surveys suggest that Italy may move out of recession in the third quarter, but Mr Howat is more pessimistic. “These surveys have proved too optimistic in recent months,” he said, “more likely, GDP will fall by around 0.2pc as GDP barely rises in the second half of the year”.
Mr del Carpio said that much of the sluggishness as reflecting a "still-uncertain business environment".
Official forecasts of Italian growth had pencilled in a 0.8pc rise this year. At best, Morgan Stanley’s Daniele Antonucci expects to see no growth this year. Italy continues to grapple with several structural issues and remains heavily indebted. Morgan Stanley noted that the victory of Prime Minister Matteo Renzi at EU elections “bodes well for reforms coming through”. While Morgan Stanley sees Italy on track to achieve a primary budget surplus of 2.5pc this year, given the lack of real growth and inflation, this will not be sufficient to stabilise high government debt.
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