The Bank of Italy said Thursday
that Italy's gross domestic product (GDP) will be negative when
figures are released for the third quarter of the year, pushing
the country into recession.
"According to our evaluations, GDP registered another
slight drop in the third quarter," the central bank said in a
report that also commented on the national budget released
earlier this week.
The central bank said a fall in investments and exports
were big factors in the drop in GDP.
It added that although household consumer spending had
increased, an apparent upswing in confidence among families and
businesses was "interrupted in the summer".
Lingering low inflation that become deflation in recent
months also demonstrated the continued economic weakness, as was
persistently high unemployment.
Although the jobless rate showed "modest" improvements
during the summer, "prospects for recovery remain uncertain,"
the bank said.
While it had been thought that Italy entered its third
recession in six years during the first half of 2014, recent
revisions by national statistical agency Istat said growth was
stalled but not negative in the period from January through
April.
That meant that, at least technically, Italy was not in
recession, defined as two consecutive periods of negative GDP.
GDP fell by 0.3% in the second quarter and similar weakness
in the July through September period would confirm recession.
Meanwhile, the central bank said the Italian government had
"made a reasoned choice" in postponing plans to balance the
budget in structural terms until 2017 to avoid "a downward
spiral" in the national economy "given the exceptional duration
and depth," of weakness.
Its comments came amid fears of sanctions from the European
Commission for pushing back its balanced-budget plans.
The bank also called for "incisive" action to exploit the
margins of flexibility in EU budgetary pacts to help stoke
growth across Europe.
It is "essential" for Italy to revive demand and
investments if it is to escape recession and deflation.
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