OECD Economic Outlook May 2019, Country Notes: Italy

Page 1

162 

Italy GDP is projected to stagnate in 2019 and expand by 0.6% in 2020. Sluggish employment growth and a rising household saving rate are holding back private consumption, while weak external demand and global trade tensions are hurting exports. Lower business confidence and weak demand are depressing private investment, while project planning and execution delays continue to hinder public investment. Consumer price inflation has moderated markedly as energy price pressures have abated and private-sector wage growth remains modest. Fiscal expansion and low growth are projected to widen the budget deficit to 2.4% of GDP in 2019 and 2.9% of GDP in 2020. The planned large increase in social spending will help to reduce poverty. Social spending should be inter-generationally fair while also promoting employment growth, especially among women and the young. Streamlining administrative procedures and strengthening capacity at central and local levels are necessary to revive public investment. Enhancing competition in markets that are still protected, raising public administration efficiency and removing obstacles to firms’ growth would foster productivity growth. The economic slowdown has been broad-based Sluggish external and domestic demand and falling business confidence have led to a drop in investment growth and a large decline in inventories, contributing to the technical recession in the latter half of 2018. In addition, weak activity in major trading partners, especially Germany, and uncertainties relating to Brexit and global trade arrangements have hurt key export sectors, such as the automotive and mechanical industries. Consumer confidence has weakened, though it remains high, and the household saving rate has risen, contributing to more sluggish household consumption. Unemployment has stopped falling and remains high, especially among the young and women. Ample slack in the labour market and stagnant productivity are damping private-sector wage growth.

Italy 1 GDP growth will recover but remain modest

The slowdown has been broad-based Volumes

Y-o-y % changes 2

Y-o-y % changes 10

1

5

0

0

-1

0

0

-5

-2

-10 Private consumption Investment

-3 -4

Exports

2012 2013 2014 2015 2016 2017 2018 2019 2020

2012 2013 2014 2015 2016 2017 2018 2019 2020

-15 -20

Source: OECD Economic Outlook 105 database. StatLink 2 https://doi.org/10.1787/888933934603 OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 1: PRELIMINARY VERSION © OECD 2019


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.
OECD Economic Outlook May 2019, Country Notes: Italy by OECD - Issuu