January 19, 2011 / 3:50 PM / 7 years ago

Italy faces weak growth through 2012, higher debt: Reuters poll

ROME (Reuters) - Italy faces sluggish growth this year and next, while its public debt is seen hitting new highs, according to a Reuters poll that showed a broadly unchanged outlook compared with three months ago.

The median forecast in the quarterly survey of about 20 analysts points to a 1.0 percent rise in gross domestic product (GDP) this year, the same weak growth rate as in 2010 and well below expectations for the euro zone average.

“With a weaker contribution from exports expected in 2011, the economy is going to struggle to pick up the pace of the recovery,” said Raj Badiani of IHS Global Insight.

“The other key sectors of the economy, particularly consumer and government spending, are likely to endure a bumpy ride in the coming months.”

The 2011 GDP forecast is unchanged from Reuters’ last survey in October but below the 1.3 percent official government forecast.

Exports from the euro zone’s third largest economy are expected to continue to lose market share while domestic demand will remain subdued as unemployment stays elevated.

For 2012, the survey forecasts full year growth of 1.2 percent, considered around the maximum non-inflationary rate for Italy, which has been one of Europe’s most sluggish economies for more than a decade.

After slowing to a projected 0.2 percent between October and December, growth is forecast to remain stable at 0.2 percent in the first quarter of 2011 and then rise to 0.3 percent in the subsequent five quarters.

An austerity package introduced by the center-right government aims to lower the budget deficit by 25 billion euros between 2011 and 2012 with measures such as cutting funding to local government, delaying retirement and freezing public sector pay.


But analysts predict the tight budget will be a brake on growth without reining in public finances as targeted.

Those polled forecast the fiscal deficit to narrow to 4.4 percent of gross domestic product (GDP) in 2011 and 3.7 percent in 2012 from 5.0 percent in 2010.

That looks good compared with many of Italy’s euro zone partners but is above the government’s official targets of 3.9 percent in 2011 and 2.7 percent in 2012.

The Bank of Italy said in its quarterly economic bulletin on Tuesday that last year’s deficit would come in below the government’s 5.0 percent goal thanks to public spending curbs.

Italy’s public debt, among the largest in the euro zone, is seen climbing to 120.2 percent of GDP in 2011 from a projected 118.6 percent in 2010, rising further to a new high of 120.8 percent in 2012.

The average unemployment rate is seen rising to 8.6 percent in 2011 from 8.5 percent in 2010, but is then set to ease to 8.3 percent in 2012.

The Bank of Italy estimates Italy’s jobless rate would be well over 10 percent if it included workers sent home on reduced pay and the thousands of Italians who have given up looking for work and are hence excluded from official data.

Editing by John Stonestreet

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