Bank of Italy nudges up Italy 2017 GDP forecast to 1.4 percent

ROME (Reuters) - The Italian economy will grow by 1.4 percent this year, its strongest performance for a decade, the Bank of Italy said on Friday, nudging up a forecast of 1.3 percent it made last month.

FILE PHOTO - A sweatshirt is displayed in a souvenir shop in downtown Rome, Italy February 1, 2017. REUTERS/Tony Gentile

Economists have been raising their forecasts for Italian growth this year since June 1, when statistics institute ISTAT sharply revised up its reading for the first quarter to 0.4 percent from a previously reported 0.2 percent.

In its quarterly economic bulletin the central bank said growth in the second quarter should maintain the same 0.4 percent quarter-on-quarter rate as seen in the first.

“GDP appears to have benefited from the positive trend in the services sector,” the bulletin said, adding that industry is also picking up after a brief dip at the start of the year.

The Bank of Italy’s outlook for the full year is a fraction higher than those of the International Monetary Fund and employers’ lobby Confindustria, which both forecast 1.3 percent.

The government of Prime Minister Paolo Gentiloni still has an official forecast of 1.1 percent, made in April, which it is expected to raise in autumn when it presents its 2018 budget.

Italy has been the euro zone’s most sluggish economy since the launch of monetary union in 1999, and growth of 1.4 percent would be its strongest expansion since 2007.

However, it would still be below a euro zone average rate forecast at 1.8 percent by the European Central Bank.

The Italian economy grew 0.9 percent last year and by 0.8 percent in 2015. The Bank of Italy forecast growth would slow slightly to 1.3 percent next year and 1.2 percent in 2019.

It added that its forecasts were more likely to prove too optimistic than too pessimistic, due to uncertainties linked to financial markets and future global economic and trade policies.

It forecast that Italian inflation, based on the EU-harmonized index, would average 1.4 percent this year and slow to 1.1 percent in 2018.

Reporting by Gavin Jones, editing by Isla Binnie