Activities in the Italian economy, the third largest in the eurozone, will decrease next year by 0.5 percent, more than the government had forecasted, the statistical office ISTAT announced on Monday.
Prime Minister Mario Monti’s government estimates that activities will decrease by 0.2 percent next year. ISTAT’s estimate for next year indicates a slowdown in the decline, considering the estimated GDP drop of 2.3 percent this year. They cite the decline in domestic demand as the reason, which will only be partially offset by increased external demand. Total investments will significantly decrease due to tight credit supply and a stubbornly negative business climate, and personal consumption will also have a negative sign, reflecting the decline in household purchasing power and rising unemployment.
Next year, the main support for GDP will be exports, given the expected slight recovery in international trade, ISTAT states. Personal consumption and investments will remain weak, so the contribution of domestic demand to GDP growth will be negative, the statement notes.
ISTAT also warns that their forecasts could be further downgraded, considering a whole range of risks to economic growth. Renewed escalation of tensions in the eurozone, increased yield spreads on Italian government bonds compared to benchmark German ones, and a slower recovery in international trade than currently expected could significantly harm the growth of Italian GDP and result in a deeper and longer recession in 2013.
