Italy set for economic reality check amid the campaign bluster

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http://maltawinds.com/2018/02/09/italy-set-economic-reality-check-amid-campaign-bluster/

Italian voters, who are being wooed by campaign promises before next month’s general election, will get the first of a series of economic snapshots showing the state of the country’s recovery on Friday.

Industrial production figures for December, out at 10 a.m. Rome time, may confirm signs of “lesser intensity” in the pace of economic activity highlighted by the national statistics agency earlier this week. Then, on Feb. 14, preliminary gross domestic product data for the fourth quarter will be released, followed by full-year 2017 GDP figures just three days before the March 4 elections.

“It is possible that the activity slowed down in the final months of 2017 mainly due to the strength of the euro” which limited Italy’s exports, said Luca Mezzomo, head of macroeconomic research at Intesa Sanpaolo SpA in Milan. “If these data turn out to be much worse than expected, opposition parties will likely use them to blame the government and its economic-policy record — and that may have an impact.”

According to the median of 23 analysts’ forecasts in a Bloomberg survey, Italy’s industrial output rose 0.8 percent in December from the previous month.

On Wednesday, the European Commission said Italy’s economy will likely expand about 1.5 percent this year, the slowest pace in the 19-nation euro area, adding that the country suffers from “limited growth potential.” The Brussels-based commission said that to obtain the projected 2018 economic expansion, the Italian government will need to keep implementing agreed-upon reforms and “prudent fiscal policies”

With polls pointing to a hung parliament after the vote, rival parties have been warning of chaos or even repeat elections.

Luigi Di Maio, 31, head of the anti-establishment Five Star Movement, branded ex-premiers Matteo Renzi, of the ruling Democratic Party, and Silvio Berlusconi, leader of the center-right bloc, as “irresponsible” because, he said in a Facebook post Thursday, they had tried but failed to pave the way to forming a government together.

Both Renzi and Berlusconi have denied they would form a so-called grand coalition if the vote proves inconclusive, calling for a new election instead. With no force seen achieving a majority, the center-right coalition led by Berlusconi is the biggest such bloc in surveys. Five Star is the biggest single party, trailed by the center-left Democrats.

Any political instability after the elections could spook markets and threaten the economic reforms.

“Italy cannot afford to interrupt its reform path and squander the results it obtained as that would mean returning to a state of crisis and uncertainty,” Prime Minister Paolo Gentiloni said on Thursday at an economic conference in Turin, an industrial center in the north.

“We can’t afford that and we won’t let it happen,” he added, citing the need for a “gradual reduction in the public debt” which at about 132 percent of GDP is the euro-region’s second-biggest after Greece.