Sunday, August 12, 2007

Italy 2007 GDP

From the FT Friday:

Sluggish Italy trims growth forecast

By Paul Bompard in Rome

Published: August 10 2007 22:09 | Last updated: August 10 2007 22:09

Economic growth in Italy, Europe’s slowest growing economy, has unexpectedly slowed even further, according to provisional figures released on Friday by the National Statistics Institute.

If this trend continues, it could create serious difficulties for the centre-left coalition led by Romano Prodi, the prime minister, for whom economic rigour, growth and a reduction of the huge national debt are primary goals.

n the April-June quarter, gross domestic product increased by only 0.1 per cent, compared with the first quarter, when it grew by 0.3 per cent. This is the slowest growth in 1½ years. Projected growth over 12 months has declined from 2.3 per cent based on the first quarter, to only 1.8 per cent, far below the European Union average of 2.6 per cent.

It is also less than the estimated 2 per cent growth in 2007, which the government used as a basis for its economic and financial planning document in June. The blueprint envisaged cutting budget deficits, as well as a gradual reduction of the national debt from the current 107 per cent of GDP to 100 per cent of GDP by 2010. Less growth would inevitably result in a smaller increase in revenue.

Pier Luigi Bersani, the minister for economic development, said: “The goal of annual growth of 2 per cent is still possible but it will be a struggle.”

On August 6, the institute published figures for industrial production in June, down 0.1 per cent compared with June 2006, with the same number of working days. In the first half of 2007 production grew by 0.8 per cent compared with the first six months of 2006, but with 126 working days instead of 125.

The institute’s analysts said the latest GDP estimates were the result of a slowdown in industry and agriculture and some growth in service industries.

One analyst suggested that two causes might be high oil prices and the effect of the strength of the euro on exports.

“There is nothing particularly new or dramatic about these figures,” said Mario Pianta, an economist at Urbino University. “Italy remains the most sluggish economy in Europe, and these figures simply confirm and underline its structural weakness.

“This may be just a temporary lull and there may be a recovery in the next quarter, but the overall picture is the one we already know.

“At the moment the main importance of these figures is that they are used by the government in planning economic policy, in negotiating with the unions, and so on,” said Prof Pianta.

An analyst at the Bank of Italy, who asked not to be named, said: “Internal demand has minor ups and downs but is substantially stable. The fact that services grew, while industry lost ground, supports the idea that energy prices on the one hand, and a strong euro discouraging exports on the other, may be responsible.”

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