ROME: Italy is exiting a long recession at such a slow pace that it will take another eight years for the economy to return to its pre-crisis levels, business lobby Confindustria said Friday.
The eurozone‘s third-largest economy shrank for more than three years until the first quarter of this year, when gross domestic product (GDP) grew by 0.3 per cent on an annual basis. The reversal was helped by stimulus action from the European Central Bank, a depreciating euro and low oil prices.
Italian GDP is now more than 9 per cent below its 2008 levels and about as big as it was in 2000.
In its biannual economic outlook, Confindustria estimated growth for the current quarter at 0.2 per cent and GDP growth for the whole of 2015 at 0.8 per cent. The economy is then expected to accelerate to 1.4 per cent in 2016.
We were expecting more,” Luca Paolazzi, head of Confindustria‘s research centre, said in a briefing with journalists. “Despite strong external tailwinds, the Italian economy struggles to pick up speed.”
If, as predicted by the International Monetary Fund, Italy‘s annual growth rate settles at an average of 1 per cent from 2017 onwards, its economy will return to the levels seen before the global financial crisis only in 2023, Confindustria said.
By comparison, Germany, France and the United States surpassed 2008 GDP levels in 2011, while Britain did so two years later. Like Italy, fellow southern European economies in Spain, Portugal and Greece have yet to close the gap.
Confindustria said Italy‘s job market – recently deregulated by Prime Minister Matteo Renzi‘s coalition government – was also recovering at a slow pace, with the unemployment rate expected to fall to 12 per cent this year, from 12.7 per cent in 2014.
To lift growth, the business lobby urged the government to invest more in education and research, press on with liberalizations and privatizations, allow firms to derogate from national wage setting agreements, and introduce a form of income support for the poorest.
Confindustria also noted that there is less wage disparity in Italy compared to Germany, France or Britain. The flip side, however, is that workers in Italy face fewer incentives to up their education or skills, since the rewards in terms of higher salary are limited.
Paolazzi dismissed suggestions that the crisis had disproportionately hit the poor. “It‘s not that the rich have gotten richer and the poorer have gotten poorer: the country as a whole has gotten poorer,” he said.
