Ec: italy ‘underperforming’

The European Commission has cut its 2008 growth forecast for Italy…

In its spring forecasts report, the Commission said that it expected Italy's economy ‘to grow by just 0.5% this year and 0.8% in 2009’, emphasizing that this was 'clearly below its potential'.

The EC has now revised its growth forecast downwards twice since November 2007, though its figures are more positive than those of the International Monetary Fund, which earlier this month revised its 2008 GDP growth forecast for Italy down from 0.5% to just 0.3%. The latest Italian government forecasts are somewhere in between, and put 2008 GDP growth at 0.6%.

Balancing act

Dan Johnson, Managing Director of TheMoveChannel.com, commented: “It is not clear whether the research underpinning this assessment was made in advance of the recent tax cuts announced by the newly re-elected Berlusconi, but while providing some stimulus for growth, these moves are clearly not going to help the astronomical public debt from which the country suffers.

“Like many countries, Italy is faced with a delicate balancing act to keep the economy buoyed in order to stave off recession in the short term, while avoiding any action that has deeper, long term ramifications.

Financial turbulence

EU Economic and Monetary Affairs Commissioner Joaquin Almunia added: “Italy is still underperforming compared to its euro-zone peers. The negative gap with the euro-zone average will widen further despite the modest exposure of the Italian banking system to current financial turbulence.

''The main worry for Italy stems from very poor economic growth, and I urge Mr Berlusconi to continue Romano Prodi’s extremely successful debt-cutting efforts”.