ROME, Jan. 19 (Xinhua) — Italy’s gross domestic product (GDP) is set to expand by 1.4 percent this year thanks mostly to domestic demand, the Bank of Italy said Friday.
In its first 2018 bulletin setting out its projections for the Italian economy in 2018-2020, the central bank said it estimates calendar-adjusted GDP grew by 1.5 percent in 2017.
The national economy should slow to +1.2 percent in 2019 and 2020, according to the bulletin.
“Overall, the GDP trend will continue to depend on support from expansive economic policies, albeit less than in the past,” central bank analysts wrote.
The bulletin saw a context of “solid and widespread” global growth and an estimated eurozone growth of 2.3 percent this year.
Italy’s GDP added 0.4 percent in the last quarter of 2017, exports grew, and the primary account surplus equalled 2.8 percent of GDP in the first three quarters of last year, the central bank said.
“Polls signal a return of business confidence to levels prior to the recession (of 2008),” the bulletin said.
Banks are extending credit again, with “lively” lending to households and businesses, especially in manufacturing.
The banking systems has also improved, with non-performing loans (NPLs) dropping from 8.2 percent to 7.8 percent of overall financing, and more coverage on banks’ balance sheets.
Employment is edging up, albeit not to pre-crisis levels, and unemployment stood at 11 percent in November 2017, the central bank said.
On the downside, the Bank of Italy saw risk ahead of the next general election on March 4. Italy’s slow but steady recovery “depends on the continuation of economic policies” that sustain long-term growth while cutting public debt, the central bank said.
Opposition center-right and populist parties are campaigning on platforms that include sweeping tax cuts, rolling back pension reforms that raised the retirement age, the introduction of a 15-23 percent flat tax in a country where taxation starts at 40 percent, and universal income.
The ruling center-left government says such promises are irresponsible to make and impossible to deliver without sending the country into an economic tailspin.