Bank of Italy says GDP likely fell in Q3

(ANSA) - Rome, October 23 - 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.