ROME: Despite performing fairly well ahead of the election, the Italian economy is likely to underperform in 2018, Jack Allen, an economist at Capital Economics, said.
During the third quarter, gross domestic product grew 0.4 percent sequentially instead of 0.5 percent growth estimated previously, revised data showed on December 1.
The overall growth was driven by an impressive 3.0 percent investment.
“This is particularly encouraging as investment has been the slowest component of expenditure to recover from the crisis – it is still almost 24 percent below its pre-crisis peak,” the economist observed.
Consumption growth edged up and net exports gained, while the only drag on growth came from the volatile stockbuilding component.Timelier activity surveys suggest that the economy performed fairly well at the start of the fourth quarter and expects the growth to pick up a little in the run-up to next year’s general election.
A pick-up in growth would be welcome news for the incumbent Government ahead of next year’s election, Capital Economics pointed out.
Although Prime Minster’s Democratic party remains the most popular single party with around 26 percent support, but on current polling it is difficult to see the election producing a stable government.
Nonetheless, Capital Economics does not expect this to have a significant economic impact.
“But we nonetheless think that growth will slow a little in 2018,” Allen said.
“The main reason is that after several years of looser fiscal policy, the current government intends to tighten the purse strings,” the economist added.
Banks remain cautious about lending, while interest rates are likely to edge up as the European Central Bank scales back its stimulus.
“We forecast GDP growth to slow from 1.5 percent in 2017 to 1.2 percent next year,” Allen predicted.
