Italy’s economy has been in recession for almost two years. GDP contracted by 2.4 percent in 2012, and at a similar annualized rate in the first half of 2013. The contraction was led by a sharp fall in domestic demand, reflecting tight credit conditions, fiscal adjustment, and depressed confidence. The unemployment rate is at post-war highs of 12 percent, with youth unemployment nearing 40 percent. Weak demand has also contributed to the narrowing of external imbalances. The current account deficit has declined from 3½ percent of GDP in 2010 to near zero in the first half of 2013, reflecting mainly a collapse in imports and steady exports.
A modest recovery is expected to start in late 2013, supported by net exports. After sharp declines in previous years, domestic demand is expected to recover slowly in the face of stiff headwinds from tight credit conditions. On this basis, growth is projected at -1.8 percent this year, before rising to 0.7 percent next year.
The ratio of nonperforming loans has almost tripled since 2007, while outflows of nonresident deposits and limited access to wholesale financing have raised the cost of funding. Credit conditions remain tight.
Notwithstanding the weak economy, stress tests results suggest that the Italian banking system as a whole is able to withstand the losses under an adverse macroeconomic scenario.
The nominal budget deficit fell to 3 percent of GDP in 2012 on the back of sizeable fiscal adjustment, allowing the country to exit from the European Union’s Excessive Deficit Procedure, and is projected to be close to that level in 2013. In structural terms, the overall balance is projected to be near zero this year.
After fiscal consolidation,and the announcement of the ECB of its outright money transactions,sovereign yields have fallen considerably.Debt, however, continues to rise and is forecast to exceed 130 percent of GDP in 2013.
In the absence of further structural reforms, medium-term growth is projected to remain low. The origins of Italy’s low trend growth pre-date the crisis and stem from its stagnant productivity, difficult business environment, and leveraged public sector.
Source: IMF
A modest recovery is expected to start in late 2013, supported by net exports. After sharp declines in previous years, domestic demand is expected to recover slowly in the face of stiff headwinds from tight credit conditions. On this basis, growth is projected at -1.8 percent this year, before rising to 0.7 percent next year.
The ratio of nonperforming loans has almost tripled since 2007, while outflows of nonresident deposits and limited access to wholesale financing have raised the cost of funding. Credit conditions remain tight.
Notwithstanding the weak economy, stress tests results suggest that the Italian banking system as a whole is able to withstand the losses under an adverse macroeconomic scenario.
The nominal budget deficit fell to 3 percent of GDP in 2012 on the back of sizeable fiscal adjustment, allowing the country to exit from the European Union’s Excessive Deficit Procedure, and is projected to be close to that level in 2013. In structural terms, the overall balance is projected to be near zero this year.
After fiscal consolidation,and the announcement of the ECB of its outright money transactions,sovereign yields have fallen considerably.Debt, however, continues to rise and is forecast to exceed 130 percent of GDP in 2013.
In the absence of further structural reforms, medium-term growth is projected to remain low. The origins of Italy’s low trend growth pre-date the crisis and stem from its stagnant productivity, difficult business environment, and leveraged public sector.
Source: IMF
