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Roundup: Italy to face economic growth without productivity increase: think-tank

Xinhua, September 29, 2016 Adjust font size:

Italy's economy is likely to remain more fragile than others in the coming months, facing periods of growth without productivity, an Italian think-thank said.

"In an increasingly uncertain global context, Italy continues to be more fragile than others," Bologna-based Prometeia said in its newly released quarterly economic outlook.

"Recovery is confirmed as being one of the weakest: gross domestic product (GDP) growth estimates have been reduced from 0.8 percent to 0.7 percent in 2016, and from 0.9 percent to 0.8 percent in 2017," the report said.

Italy, and other large economies such as Germany and the United States, might face periods of growth lacking a consistent productivity increase, Prometeia analysts added.

"The key issue for Italy's economy is how to support the growth in demand, with limited fiscal resources, without forgetting to ensure the continuation of long term growth," the outlook stated.

"In other words, how to break out of the trap of economic growth without productivity," said the report.

Prometeia also warned scepticism was mounting over the effectiveness of forthcoming decisions of major central banks, since "governments grappling with electoral deadlines" did not sustained their latest expansionary monetary policies.

A further factor of concern was the upsurge of protectionist measures, which "could hinder the recovery of global trade already in serious slowdown," the report said.

Italy's economy, the third largest in the eurozone, came out from a three-and-a-half-year long recession only in 2015, posting a 0.7 percent annual growth, according to the National Institute of Statistics (ISTAT).

Yet, the GDP remained flat in the second quarter of 2016 compared to a 0.3 percent growth in the previous quarter.

Such stagnation was a cause of concern, because it was mainly due to a domestic demand that remained below expectations, the think-tank stressed in the outlook.

The fiscal stance was expected as moderately expansionary with the 2017 budget law, which would bring about a halt in the decrease of the deficit/GDP ratio (forecast at 2.4 percent this year, and 2.5 percent in 2017).

Finally, the country's economy might suffer from an additional factor of uncertainty with a referendum on the constitutional reform due to be held on Dec. 4, 2016.

Earlier this month, Italian economy minister Pier Carlo Padoan declared Italy would have to cut its 2016 growth estimates from the previous 1.2 percent forecast in April. He did not provide details over the new projections.

Last week, the Organization for Economic Cooperation and Development (OECD) said Italy's GDP was expected to increase by 0.8 percent in 2016 and in 2017, from previous 1.0 percent and 1.4 percent respectively forecast in June.

Italy's largest business association Confindustria also recently downgraded its projections to 0.7 percent from 0.8 percent in 2016, and to 0.5 percent from 0.6 percent next year. Endit