Italy Downgrades Growth Forecasts to under 1%

Rome, – Italy’s economy will grow at a slower pace and the country will be more indebted than previously anticipated, the Italian government said, as it revised economic forecasts in preparation for next year’s budget law.

In April, Prime Minister Matteo Renzi’s government said gross domestic product (GDP) was expected to expand by 1.2% this year and 1.4 % in 2017, while the deficit was supposed to fall over the same period from 2.3% of GDP to 1.8% of GDP.

Instead, the economy will expand by just 0.8% this year and 1% in 2017, while the deficit will fall to 2% of GDP, Renzi said after a cabinet meeting. He said the budget shortfall for 2016 was expected to be 2.4%, slightly higher-than-expected.

Italy’s 2017 deficit could be even higher, at 2.4%, if parliament approves extra spending on two “exceptional circumstances,” namely last month’s deadly earthquake and an influx of boat migrants, Renzi said.

The government also said public debt, which Italy is under pressure to reduce, would rise further to 132.8% of GDP, from 132,2% last year, and that the 2017 budget law, expected to feature tax cuts, would be unveiled in mid-October.

The European Commission, which polices Eurozone countries’ budgets, will have to approve Italy’s economic plans. Renzi is a vocal critic of austerity policies, and spendthrift policies could help him win a crucial referendum on constitutional reforms due on December 4.

Italy’s economic performance has been miserable for the last 15 years. The country went through a severe double-dip recession after the global financial crash in 2008, and a timid recovery halted in the second quarter of 2016, when zero growth was recorded.

Source: Qatar News Agency