Italy

Current Economic Outlook

Italian GDP will contract 5.5% in 2009 with a further decline of 0.3% occurring in 2010 as the country struggles to recover from the global financial crisis. Italy has historically performed worse than much of Western Europe. GDP has been particularly sluggish, averaging below 1.0% per year, since 2002. Growth is unlikely to return until 2011. Italy is increasingly exposed to the international economy due to its high export‐dependence, and the collapse of global trade has had a broad negative impact on the country’s economy. With constrained domestic demand, an export‐driven recovery is essential for Italy to regain growth in its domestic output. The crisis has hit investment hard; it declined to very low levels in the first half of 2009. Gross fixed capital formation has been declining for three successive quarters, causing the largest contraction since the recession of 1992‐93. Firms cut their investment in machinery and equipment drastically in an attempt to cut costs and remain operational. A recent survey by the Bank of Italy suggests manufacturing firms have reduced their investment plans...

Read the latest RGE Global Economic Update.