Italy employers raise GDP growth forecasts, government to follow

Italian employers group Confindustria on Thursday raised its forecasts for Italy's economic growth this year and next, and the government said it would do the same when it issues new official projections next week. Italian economic data has been brightening since gross domestic product (GDP) rose a stronger-than-expected 0.4 percent in the first quarter, though the country continues to lag most of its euro zone peers.
Confindustria raised its forecast for 2017 growth to 1.5 percent from a previous forecast of 1.3 percent, made in June. Next year, when Italy faces an uncertain national election, growth will slow to 1.3 percent, the employers' lobby said, revising up its June forecast from 1.1 percent. Prime Minister Paolo Gentiloni's government has targeted 2017 growth of 1.1 percent but that forecast, made in April, will be raised when the Treasury issues new projections next week, Economy Minister Pier Carlo Padoan said.
"The growth outlook has improved since April," Padoan told a conference in Rome, adding that the strength of the euro could slow down the economy at some point. The Treasury's chief economist said on Tuesday that growth is now seen at 1.4 or 1.5 percent this year, and "well over 1.2 percent" next year. The government's April forecast was for 1.0 percent in 2018.
Gross domestic product rose 0.4 percent in each of the first two quarters of this year - strong increases by the standards of Italy, which has been the most sluggish euro zone economy since the launch of the single currency in 1999. The economy has recently been buoyed by domestic demand, with consumer spending supported by tax cuts for low earners.
Growth will accelerate to 0.5 percent in the third quarter, Confindustria forecast, before slowing to 0.3 percent in the last. The stronger outlook will help public finances, said Confindustria, which trimmed its forecast for the 2017 budget deficit to 2.1 percent of GDP from 2.3 percent, bringing it into line with the government's target.
Confindustria also trimmed its forecast for Italy's huge public debt - the highest in the euro zone after Greece's - to 132.6 percent of GDP this year, from a June forecast of 133.2 percent. That would leave the debt at the same level as in 2016. Padoan, who was chief economist a the Organisation for Economic Cooperation and Development before joining the government in 2014, seemed to suggest he would not seek a further term after the election due by May next year. "I hope to be able to return to my (economic) studies as soon as possible," he said.