Italy employers lobby trims 2014 GDP forecast

Italian employers lobby Confindustria said on Wednesday the country's economy would shrink slightly more in 2014 than it previously forecast and would return slowly to growth next year. Gross domestic product will fall this year by 0.5 percent after declines of 1.9 percent in 2013 and 2.4 percent in 2012, Confindustria said, trimming its previous forecast for a 0.4 percent contraction.
"It is still unclear how 2014 will finish and what inheritance it will leave behind for 2015," Confindustria economists said in a statement, warning that growth over the next two years would "not reach a particularly strong rate". The euro zone's third-largest economy, Italy has been dipping in and out of recession for six years, plagued by stubbornly high unemployment, weak institutions, low investments and chaotic public administration.
Confindustria said per capita GDP has slumped back to where it was in 1997. The group partly blamed corruption for stunting Italy's economic growth, and said it would bring civil action in an ongoing investigation into a criminal underworld of bribery, extortion and rigged contracts in the capital Rome. The World Bank's Control of Corruption index ranks Italy 90th out of 210 countries, 37 places behind euro zone neighbour Spain. "If Italy reduced corruption to the same level as Spain, the growth rate would be 0.6 points higher," Confindustria said.
The economy should grow 0.5 percent in 2015 and 1.1 percent in 2016, Confindustria said, versus government forecasts of 0.3 percent contraction and 0.6 percent growth respectively. Italy's public debt, proportionately the second highest in the euro zone after Greece's, will total 132.2 percent of output this year, Confindustria said. It was lower than its previous 137 percent estimate due to changes in how it is calculated. The debt should total 133.8 percent of output next year and 133.7 percent in 2016, the lobby group said.
Prime Minister Matteo Renzi has promised to respect the European Union's budget deficit limit of 3 percent of output, and Confindustria said it should hit the limit this year. The deficit should fall to 2.7 percent in 2015 and 2.5 percent in 2016, Confindustria said. A recent sharp fall in the price of crude oil could lead to Italy saving 14 billion euros ($17.4 billion) a year, Confindustria said, which would translate to a 0.3 percent boost to GDP in 2015 and a further 0.5 percent in 2016.