ROME: Economic growth in Italy remains “fragile,” cautioned business group Confcommercio on Thursday even as Confindustria, representing major employers, expressed optimism for a slow but encouraging expansion. Even as the two bodies differed slightly on the pace of growth in the longsuffering Italian economy, both agreed on the need for more business tax cuts which they say would boost productivity.
That is something that Premier Matteo Renzi has promised, pledging a total of about 50 billion euros in tax cuts over five years, starting with measures he introduced last year. Researchers at the Confindustria study centre said that they expect GDP expansion this year to meet and maybe exceed their forecasts made last month of a 0.8% pace of GDP growth this year, rising in 2016 to 1.4% growth. “The recent progress…is in line with or even higher than that indicated by the study centre,” researchers said in a monthly update. It acknowledged that is still a slow pace, although the Confindustria estimates are in line with increased forecasts last week from the Bank of Italy which included a 0.7% growth rate this year and rising to 1.5% in 2016.
This was an improvement over the central bank’s previous outlook for GDP growth of 0.4% in 2015 and 1.2% next year. outlook. It is also similar to forecasts earlier in July from the Organization for Economic Cooperation and Development (OECD) which said that Italy’s GDP will rise by 0.6% in 2015 and 1.5% in 2016 – “in both cases, below the growth forecast for the eurozone and the OECD as a whole,” the agency said. While many Italians may feel encouraged by signs of some sort of economic growth after its longest recession since the Second World War, the country is not assured of a full recovery, warned Confcommercio, which represents a range of independent Italian businesses. Italy’s economic recovery remains “too fragile,” its chief Carlo Sangalli said Thursday. ”
Today, we are certainly facing the fact that there is a recovery, but it is still too fragile, timid, uncertain,” said Sangalli. “We have to take advantage of every opportunity to make 2015 the year of recovery,” Sangalli added. On Wednesday, Confcommercio released a study of spending by local governments, which said that almost 23 billion euros in taxes were being wasted and could be cut. Other wasted tax dollars could be reallocated for better use, such as infrastructure investments but also tax cuts, according to Confcommercio. Lower business taxes would boost business competitiveness and help the economy, Confindustria said in its report on Thursday. ”
The priorities for Italy,” must include tax cuts as part of broader structural reforms, the group said. As well, efforts to increase employment will boost consumer confidence and improve their spending power, essential to economic expansion. Renzi’s tax cut measures include last year’s reduction in the IRAP regional business tax as well giving low-income families an 80 euro monthly bonus. He also suggested a reduction in the corporate income tax (IRES) would be coming in 2017. That is all part of a “radical process of modernization of the country (that) must create wealth and jobs after years of crisis,” said Economy Minister Pier Carlo Padoan.
