Italy slashes 2012 growth forecast

Italy on Wednesday said its recession would deepen in 2012 with the economy shrinking 1.2 percent and delayed a target to balance its budget by 2013, warning there was still "a long way to go."

"Despite the progress made, there is still a long way to go in a context that is more favourable but still characterised by elements of uncertainty," a report approved by the cabinet that accompanied the new forecasts said.

"The coming months offer a window of opportunity that must be used," it said, pointing to "a further deterioration of the economic situation since December" as the economy entered recession in the second half of last year.

Prime Minister Mario Monti, who came to power in November to replace media magnate Silvio Berlusconi as the eurozone debt crisis hit Italy, had initially vowed to uphold the previous government's pledge to balance its budget by 2013.

His technocrat government has now raised the 2013 deficit target from 0.1 percent of Gross Domestic Product (GDP) to 0.5 percent, which would still be within new EU Fiscal Compact treaty limits.

The government said it would cut the deficit -- the shortfall between revenues and spending to 0.1 percent in 2014 and to zero by 2015.

The International Monetary Fund (IMF) offered a more gloomy outlook on Tuesday, forecasting that Italy's deficit would only be reduced to 2.4 percent this year, 1.5 percent in 2013 and then rise back to 1.6 percent in 2014.

"The reconfiguration of the Italian economy will take several years. We are aware that what we are doing is just the beginning of an operation that will take several years," Monti said at a press conference.

While Monti has been hailed as helping the country through the debt crisis storm which has rattled the eurozone, skittish markets spooked over the outlook for Italy and Spain have again been under pressure in recent days.

Rome paid sharply-higher rates on three-year bonds at a sale last week while Madrid's borrowing costs also rose, although they have eased back this week.

Wednesday's report also said Italy's's massive public debt would drop to 120.3 percent of GDP in 2012 and continue to decrease over the next few years, to 117.9 percent in 2013, 114.5 percent in 2014 and 110.8 percent in 2015.

It also said the economy would start to grow again in 2013 with a 0.5-percent expansion that year, 1.0 percent in 2014, and 1.2 percent in 2015.

The IMF is forecasting Italy's economy will shrink by 1.9 percent this year. "Re-balancing the finances has been accompanied by various reforms aimed at removing the many constraints which have held back Italy's growth potential," Monti said.

"The reforms should boost growth by 2.4 percentage points between 2012 and 2020," he said.

Milan's stock market was down 2.43 percent after the figures were announced.

The revised economic outlook does not come at a good time for Monti who implemented a series of biting reforms to rein in the debt but has struggled to make inroads with his "Grow Italy" plan as his approval ratings begin to wane.

There has been trade union anger in Italy over the government's reform measures and public outrage over a series of suicides linked to the economic crisis.

"The crisis is forcing families, young people, workers and businesses to pay a very high price, and sometimes there are experiences which end in desperation," Monti said.

About 1,000 people voiced their sympathy with the victims of the crisis in a silent protest outside Rome's landmark Pantheon late Wednesday amid calls that everything must be done to stop the suicides.

"The state must find a response to the difficulties of small and medium-sized companies to restart their activities and for the Italian economy to improve," Maurizio Flamini, head of the Rome region's small and medium-sized business lobby, Federlazio, told AFP.

The former eurocrat's government has acted fast to pass reforms to overhaul the pension system and labour market and has imposed budget cuts and tax hikes but as in the eurozone, such policies are taking a toll on growth.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • N. Korea fires missiles in anger at South-US military drills
    N. Korea fires missiles in anger at South-US military drills

    North Korea fired two short-range ballistic missiles into the sea and vowed "merciless" retaliation Monday as the US and South Korea kicked off joint military drills denounced by Pyongyang as recklessly confrontational. The annual exercises always trigger a surge in military tensions and warlike rhetoric on the divided peninsula, and analysts saw the North's missile tests as a prelude to a concerted campaign of sabre-rattling. "If there is a particularly sharp escalation, we could see the …

  • Troops overrun BIFF bomb-making facility in Mamasapano
    Troops overrun BIFF bomb-making facility in Mamasapano

    Government troops captured Sunday a bomb and weapons factory of the Bangsamoro Islamic Freedom Fighters (BIFF) in Mamasapano, Maguindanao, the Armed Forces of the Philippines (AFP) announced yesterday. Col. Restituto Padilla, AFP spokesman, said the captured bomb and weapons factory is located inside an area controlled by radical Muslim cleric Ustadz Mohammad Ali Tambako at Barangay Dasikil in Mamasapano. …

  • No need for Revilla to visit son – prosecutors
    No need for Revilla to visit son – prosecutors

    Instead of filing an opposition, ombudsman prosecutors filed a manifestation yesterday expressing belief that there is no urgent need for Sen. Ramon “Bong” Revilla Jr. to visit his son at the Asian Hospital and Medical Center. “Based on the clinical abstract issued by the Asian Hospital on patient (Cavite) Vice-governor (Jolo) Revilla, which was submitted by accused Revilla in support of his Urgent Motion, Vice-governor Revilla is in stable condition and has stable vital signs, as of March 1, …

  • Couple married 67 years holds hands in final hours together
    Couple married 67 years holds hands in final hours together

    FRESNO, Calif. (AP) — After spending 67 years together as devoted husband and wife, there was no question how Floyd and Violet Hartwig would end their lives — together. …

  • How Islamic is Islamic State group? Not very, experts say
    How Islamic is Islamic State group? Not very, experts say

    CAIRO (AP) — Three British schoolgirls believed to have gone to Syria to become "jihadi" brides. Three young men charged in New York with plotting to join the Islamic State group and carry out attacks on American soil. A masked, knife-wielding militant from London who is the face of terror in videos showing Western hostages beheaded. …

  • 'Jihadi John' relatives under watch in Kuwait
    'Jihadi John' relatives under watch in Kuwait

    Kuwaiti authorities are closely monitoring several relatives of "Jihadi John" who live and work in the Gulf emirate where the Islamic State executioner was born, press reports said on Sunday. A number of relatives of Mohammed Emwazi, named as the militant who has beheaded at least five Western hostages, are working in Kuwait and like him hold British citizenship, Al-Qabas newspaper reported. "Security agencies have taken the necessary measures to monitor them round the clock," the paper said, …

  • Interview: Australia says hunt for missing MH370 jet may be called off soon
    Interview: Australia says hunt for missing MH370 jet may be called off soon

    By Matt Siegel CANBERRA (Reuters) - The search for missing Malaysia Airlines Flight MH370 cannot go on forever, Australia's deputy prime minister said, and discussions are already under way between Australia, China and Malaysia as to whether to call off the hunt within weeks. No trace has been found of the Boeing 777 aircraft, which disappeared a year ago this week carrying 239 passengers and crew, in what has become one of the greatest mysteries in aviation history. The search of a rugged …

  • Bong wants to see son in hospital
    Bong wants to see son in hospital

    Detained Sen. Ramon “Bong” Revilla Jr. will ask the Sandiganbayan to allow him to visit his son, Cavite Vice Gov. Jolo Revilla, confined at the intensive care unit of the Asian Hospital and Medical Center in Muntinlupa for a gunshot wound in the chest. Lawyer Raymond Fortun, spokesman for the Revilla family, said the senator would ask for a 24- to 48-hour furlough. Sen. Revilla’s legal counsel Ramon Esguerra said doctors removed a half liter of blood. Fortun said he was able to talk to Jolo …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options