Gulf Today

EU cuts Italy 2020 GDP forecast

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ROME/BRUSSELS: The European Commission (EU) said on Thursday it expects Italy’s economy to grow just 0.3 per cent in 2020 following a shock fall in national output late last year, below its previous 0.4 per cent forecast and the 0.6 per cent rate Rome said in September was its target.

“Downside risks to the growth outlook remain pronounced,” the European Union’s executive said, estimating 2021 growth of 0.6 per cent in its new interim forecast.

Italy’s economy - the euro zone’s third largest - unexpected­ly contracted by 0.3 per cent between October and December and Brussels estimated “a slow start into 2020” on the basis of recent business surveys.

Industrial output was much weaker than expected in December, falling 2.7 per cent from the month before, Istat data showed this month.

Economy Minister Roberto Gualtieri said the sharp decline in Italy’s economy at the end of last year was a source of concern for the 5-1/2-monthold government but added that all economic indicators showed a recovery in January.

“I’m expecting a rebound of economic activity in January and I’m confident that the situation can pick up again,” Gualtieri said in an interview with La7 broadcaste­r before the EU released its report.

Last year Italy targeted a 2020 deficit goal of 2.2 per cent in terms of national output based on the 0.6 official growth target.

Rome will update its forecasts next April when it publishes new budget estimates.

Italy’s 10-year bond yield tumbled over six basis points to around 0.86 per cent, narrowing the gap over safer German Bund yields to around 125 basis points - levels last seen in May 2018, just before a political crisis in Italy sparked a sharp sell off in its debt.

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People buy fruits in a street market in Rome, Italy.
Reuters ↑ People buy fruits in a street market in Rome, Italy.

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