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.

  • US missile cruiser docks at Subic
    US missile cruiser docks at Subic

    A US Navy missile cruiser has dropped anchor in Subic Bay as part of “routine port call,” amid rising tension in the West Philippine Sea stirred by China’s island building activities and other threatening moves by its forces. The arrival of the Ticonderoga-class missile cruiser USS Shiloh (CG-67) at the Subic Bay Freeport in Olongapo City yesterday was “just a routine port visit for ship replenishment and routine maintenance of shipboard system,” said Philippine Navy Public Affairs Office …

  • Agri, power sectors should brace for El Niño
    Agri, power sectors should brace for El Niño

    The agriculture and power sectors, as well as the general public should brace for a prolonged El Niño phenomenon that could further reduce water supply for electricity and irrigation, the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) warned yesterday. Flaviana Hilario, acting deputy administrator for research and development of PAGASA, said the El Niño condition is expected to intensify from weak to moderate by August this year. Anthony Lucero, …

  • China to US: Help cool down Phl on sea row
    China to US: Help cool down Phl on sea row

    The US should help “cool down” the Philippines and realize that its meddling in the West Philippine Sea (South China Sea) dispute would only stir tensions, a Chinese newspaper reported. “Washington should know its meddling in the South China Sea has been destabilizing the region. The US has vowed not to take sides in the territorial dispute, which involves China, the Philippines, Vietnam, Malaysia, Brunei and Taiwan. …

  • No stopping K to 12 despite SC case, protests
    No stopping K to 12 despite SC case, protests

    K to 12 is the fruit of years of comprehensive consultations involving different sectors in education,” Aquino said during the launching of the program at the Philippine International Convention Center (PICC) in Pasay City. Organized by the Department of Education (DepEd), the launch was attended by teachers, students and representatives from different stakeholders supportive of the K to 12 program. It was held two years after the signing of Republic Act 10533, or the Enhanced Basic Education …

  • MNLF pushes review of peace pact with gov’t
    MNLF pushes review of peace pact with gov’t

    The Moro National Liberation Front (MNLF) maintained its bid for completion of the tripartite review of the implementation of the peace agreement with the Philippine government in 1996. The MNLF’s desire to put consensual closure to the tripartite effort was relayed by its leaders to Sayed El-Masry, the special envoy of the Organization of Islamic Cooperation (OIC), during the annual foreign ministers conference in Kuwait last Thursday. The MNLF peace agreement with the government in Sept. 2, …

  • Noy to raise sea dispute issue with Abe
    Noy to raise sea dispute issue with Abe

    President Aquino is expected to raise the West Philippine Sea dispute during his meeting with Japanese Prime Minister Shinzo Abe in Japan next week. However, there is no word yet if the Philippines will specifically ask Tokyo to join calls for China to stop its massive reclamation activities in disputed waters. Aquino will leave for Tokyo on June 2 for a state visit until June 5. …

  • CHED releases wrong data on tuition hike
    CHED releases wrong data on tuition hike

    The Commission on Higher Education (CHED) appears to have released erroneous data on the allowed tuition and other fee increases in Metro Manila for the incoming academic year. On the list of the 51 approved higher education institutions (HEI) allowed to impose hikes, CHED pegged the average increase in tuition at P32.34 per unit and the average increase in other fees at P34.79. However, a Philippine STAR re-computation showed that the actual average approved tuition increases in Metro Manila …

  • Leni Robredo may run for senator
    Leni Robredo may run for senator

    The widow of the late Interior Secretary Jesse Robredo admitted that running for higher office in 2016 had crossed her mind. Camarines Sur Third District Rep. Leni Robredo said she is focused on her re-election, but there is always the possibility that she would seek higher office. “There is always that possibility… because the filing (of certificate of candidacy) is in October yet,” Robredo said in an interview after her speech during the 23rd Girl Scouts of the Philippines Council …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options