ROME: The Italian National Statistical Institute is expected to report that the Italilan economy slowed down in Q4 2015, mainly due to the external sector. Italy’s economic growth likely remained flat in Q4. The result is evident from the latest industrial production data that reported a drop of 0.7% m/m in December and a decline of 0.2% q/q in Q4.
On the demand side, the weakness is mainly due to the external sector. Imports volume increased 0.8%, whereas exports declined by 0.1% between Q3 and October/November. Most of the slowdown in export is from Asia. In spite of the possible slowdown, the economy is still likely to continue rebounding and advance moderately, with the real GDP growing by 1.1% in 2016.
The Italian government’s overall expansionary stance is seen the budget plan of 2016. The government will offer several tax cuts to households and businesses in order to maintain economic momentum at present when the global economy is weak.
Meanwhile, the nation’s exports are expected to grow in the year, although at slower rates. Major export markets are expected to lack dynamism. This is not likely to be countered by an increase in market shares as unit labor costs continue to rise as the euro, in trade weighted terms. The annual rate of real exports is expected to grow at around 2.5%-3.5% in the coming quarters.
Meanwhile, Italy’s investment growth is expected to be positive in 2016; however moderately. Several surveys show that the businesses are considering the rebound in demand. Moreover, the businesses will have to increase their capex in order to boost output as capacity utilisation reaches high levels.
Equipment investment is likely to moderately improve by 1.6% y/y in 2016 and 1.1% in 2017. Meanwhile, Italy’s private consumption is likely to grow as consumers will gain from the rebound in labor market and expected moderation in inflation.
