Growth in Italian economy to be weaker in 2014 than expected
Debt to peak at 133.7% of GDP this year, then slowly drop25 February, 15:17
The EC revised down Italy's 2014 growth forecast to 0.6% from previous estimates of 0.7% and warned that when final figures for last year are settled, those results will likely also be weaker than previously thought.
"After contracting 1.9% in 2013, Italy's economy is expected to stage a slow recovery in 2014, driven by stronger external demand," the EC said in its report on the Italian economy. "As credit conditions ease, growth is expected to rise further in 2015," along with consumer confidence and external demand from trading partners regaining their own strength following recession in many parts of Europe, the report said. Debt as a percentage of GDP will increase this year, due to new expenses in 2014, including payments owed to private business, and will reach 133.7% - still lower than the 134% previously forecast by the EC, it said.
Next year, the debt-to-GDP ratio will begin to drop, thanks to a better economy, the report added. The EC said it had revised downwards its economic growth forecast for Italy this year and last, but was keeping steady its expectations for growth of 1.2% in 2015.
The EC had previously expected the economy would lose 1.8% in 2013 and in this report, it worsened its 2013 forecast to a loss of 1.9%.
That is gloomier than the Italian government's predictions late last year for a 1.7% loss in 2013, growth of 1% this year and of 1.7% in 2015.
Unemployment in Italy will likely be worse than previously predicted, the EC said as it lowered its forecast to a 12.6% jobless rate for 2014 and 12.4% for 2015.
In November, the EC had predicted a jobless rate at 12.4% and 12.1% for 2014 and 2015, respectively. The statement faulted bad labor-market conditions and weak consumer demand for economic weakness.
The EC noted that unemployment is set to remain high throughout the eurozone and the European Union, with only a "modest" reduction expected.
Across the eurozone, the average unemployment rate is forecast to drop from 12.1% in 2013 to 12.0% in 2014 and 11.7% in 2015. In all of the European Union, unemployment is expected to slide from 10.9% in 2013 to 10.7% in 2014 and 10.4% in 2015.
Italy's new Premier Matteo Renzi, who faced his second of two confidence votes on Tuesday, has said that the country has been mired in a "swamp" of economic weakness and loss.
However, he has maintained his new, slimmed-down cabinet has the plan to help Italy as the economy struggles out of its worst recession since the Second World War.
In Italy, that "severe recession...came to a halt with economic activity posting a moderate increase in the last quarter of 2013," the EC forecast said.
It blamed weak consumer demand due in part to tight financing conditions "and high uncertainty holding back consumption and investments".
Last week, the former economy minister Fabrizio Saccomanni said that Italy's return to positive growth would be "homegrown" as the country struggles to avoid breaching the EU's 3% deficit-to-GDP threshold.