MILAN, July 14 — Italy’s already weak growth forecasts were revised downwards yesterday, a potential roadblock to the country’s new anti-establishment and far-right coalition government’s expensive promises amid trade tensions between the United States and the European Union.
The Bank of Italy revised its growth estimates down to 1.3 per cent in 2018, against the previous forecast of 1.4 per cent, while 2019 growth dropped to one per cent from 1.2 per cent.
“There are significant risks to the recovery of the global economy”, warned the central bank yesterday, adding that the risks stemmed from “the possible intensification of the protectionist orientation of trade policies, with negative repercussions on business confidence, the expansion of trade and global demand”.
Italy’s government — made up of an alliance between the populist Five Star Movement and nationalist League — made a series of costly pledges in their joint government programme that the two parties said would be financed by economic growth.
The promises, which include significant tax cuts combined with a basic income for the unemployment and those living on low wages, have been estimated as costing as much as €100 billion to an economy weighed down by a €2.3 trillion debt running at 132 per cent of the country’s GDP.
New Minister of Economy and Finance Giovanni Tria this week said no to a request from Brussels to reduce Italy’s structural deficit by 0.3 per cent in 2018.
The growth revisions came after the European Commission also lowered its growth forecasts for both Italy and eurozone as a whole thanks to the bitter trade standoff between the bloc and the US ignited by American president Donald Trump.
The Commission predicts Italian gross domestic product growing 1.3 per cent this year (also down from the previously forecast 1.5 per cent) and 1.1 per cent for 2019 (down from 1.2 per cent). — AFP