Roundup: OECD raises Italy's GDP growth estimate to 0.9 pct in 2017

Italy's gross domestic product (GDP) is expected to grow by 0.9 percent in 2017, and by 1 percent in 2018, the Organization for Economic Cooperation and Development (OECD) said on Monday.

The estimate for 2017 was slightly revised by 0.1 percent upwards, compared to a previous forecast in September.

For 2016, the international economic body confirmed a 0.8 percent growth. "Accommodative euro-area monetary conditions are supporting the moderate recovery (in Italy)," the OECD said in its November Global Economic Outlook report.

"The 2017 budget will appropriately support growth, and a further fiscal easing is assumed in 2018. Nonetheless, lower interest payments will help keep the budget deficit stable," it added.

The OECD acknowledged the Italian government was "making progress on structural reforms" concerning active labor market policies, public administration, and school system.

It also provided a positive view of the constitutional reform recently approved by the Italian parliament, which will be definitively confirmed or rejected in a referendum on Dec. 4.

"The planned constitutional reform would be a further step forward in the reform process, and would enhance political and economic governance," the OECD said, "Continuing and deepening structural reforms will be fundamental to raising living standards for all Italians."

On the other hand, the OECD urged Italy to raise public investment and enhance programs to tackle poverty, to increase labor market participation especially among youth and women, and to further boost innovation.

In order to pursue such goals, the government should use the fiscal space generated by a decline in yearly interest payments registered since 2012, and worth some 15 billion euros (15.8 billion U.S. dollars) or nearly one percent of the country's GDP, the OECD suggested.

"Despite stronger job gains, private consumption growth has weakened following rising uncertainty and declining consumer confidence," the report also noted.

The large stock of non-performing loans burdening Italian banks, which is estimated at 360 billion euros, "restricts credit supply" and hinders the recovery of investment.

Italian sales abroad were being restricted by a slow growth pace in Italy's export major markets, and by geopolitical tensions.

Next year, the OECD forecast private consumption growth would remain moderate due to the uncertainties over the banking sector and the effect of Brexit.

As for the job market, the growth in employment might slow down after social security contribution exemptions will expire in 2018, the OECD warned.

Overall, the report forecast the eurozone would grow by 1.7 percent this year, by 1.6 percent in 2017, and by 1.7 percent in 2018.(1 euro = 1.06 U.S. dollars) Endit