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Italy to improve economy despite IMF’s forecast

Italy to improve economy despite IMF’s forecast

ROME: The International Monetary Fund (IMF) recently up adjusted its forecast for Italy’s economic growth, but warned the growth could not be maintained without healthier development in some areas.

The IMF now says it expects the Italian economy to grow by 1.3 percent this year, up from the 0.8 percent forecast at the start of the year and higher than the 1.1 percent growth rate predicted by the Italian government’s own economists.

For the next year, IMF predicts 1.0 percent growth, compared with a 0.8-percent rate in its previous forecast for the country.

The growth rate projections come despite a strengthening euro that makes Italian exports beyond the euro zone more expensive and makes it more expensive for travelers holding U.S. dollars, British pounds, or other currencies to visit the country.

Prime Minister Paolo Gentiloni was pleased with the upgrade, saying it “improves our confidence and conviction about our country’s potential.”

But IMF meanwhile warned that without a healthier banking sector, reduced debt, higher wages, and lower taxes, Italy will not be able to maintain robust growth and stability.

Analysts who spoke to Xinhua agreed with the IMF on this point.

“The adjustments are small and on their own they probably aren’t important,” Alberto Majocchi, a professor of finance science at the University of Pavia and president of the Institute for Economic Studies and Analysis, said in an interview.

“It could mean that a phase is finishing in Italy. But that will only mean something if Italy can continue its reforms,” the economist explained.

Majocchi specially mentioned industrial production, overall productivity, efficiency in the public sector, and the flight of skilled labor as areas where Italy has a strong need to make strides.

Alessandro Poli, an economic statistics expert with Rome’s La Sapienza University, said the fact that the growth projections were upped without an increase in construction — Italian construction was down 0.3 percent in the first quarter of this year over the same period in 2016, according to Poli — higher economic growth would probably not last.

“I think this may be a signal that the worst for Italy is in the past, but nobody can conclude that what we are seeing is a complete economic recovery,” Poli told Xinhua.

Majocchi said it was encouraging that Italy growth projections from IMF were beginning to approach those for the European Union (EU) as a whole — a positive development for a country that saw its economy grow faster than the EU as a whole only twice since 2000.

But at the same time IMF upped its growth forecasts for Italy, it did the same thing for the EU as a whole: the EU-wide projections for 2017 were raised to 1.9 percent from 1.7 percent previously for 2017, and to 1.7 percent compared to 1.6 percent previously for 2018.

That trend, IMF said, showed Italy’s recovery could be fueled in part by improved prospects in the EU, a bloc Poli said accounts for more than half of Italian exports.