MILAN, Jan 31 — The Italian economy contracted in the fourth quarter of 2018, plunging the country into a technical recession, official data showed today.

The 0.2 per cent contraction — following a 0.1 per cent fall in the third quarter — will put pressure on the populist government in the eurozone’s third largest economy, which took power in June on the back of big-spending electoral promises.

Italy’s Prime Minister Giuseppe Conte had anticipated the bad news yesterday during a business conference in Milan.

"Analysts tell us we’ll likely still suffer a bit at the start of this year,” he said, pointing the finger at a slowdown in China and Germany which are hurting Italian exports.

"But all the elements are there to recover in the second half,” Conte added.

The coalition government of the anti-establishment Five Star Movement (M5S) and the far-right League party was forced to water down its ambitious and costly budget in December to avoid being punished by the European Commission and the financial markets.

A slowdown will make it even harder to follow through on expensive vote-winning measures both parties promised their bases, from a reform to the pension system and income support for the poor.

Today’s data "reflect a marked worsening of the industrial sector’s performance, and of a negative contribution of agriculture,” national statistics institute Istat said.

The institute had earlier released December’s unemployment rate, which fell to 10.3 per cent from 10.5 per cent, a positive sign. The jobless numbers rose 0.1 per cent for young people aged 15 to 24, however, bringing the rate to 31.9 per cent. — AFP