ROME, Jan. 18 (Xinhua) -- The Italian economy would grow less than expected in 2019, while production activities remained weak throughout the last quarter of 2018, the Bank of Italy said on Friday.
The central institute forecast the gross domestic product (GDP) would grow by 0.6 percent this year, cutting a previous 1.0 percent projection posted in mid-December (which coincided with government's expectations).
The downward revision was based on three main factors, the institute explained in its quarterly report. "New information points to a sharper cyclical slowdown in the last part of 2018, which reduced the carry-over effects on growth by 0.2 points," it wrote.
The two further factors were a cut in companies' propensity to invest, and an expected slowdown in global trade.
"Risk factors weighing on global economic prospects include possible repercussions of a negative outcome to trade negotiations between the United States and China, the worsening of financial tensions in emerging economies, and the arrangements for the United Kingdom's withdrawal from the European Union," the Bank of Italy said.
In addition, it added, downside risks to growth would also stem from a possible renewed increase in interest rates on government bonds, and from a faster deterioration in private sector borrowing conditions.
In the years 2020-2021, the central institute forecast a growth of 0.9 percent and 1.0 percent, respectively.
In its report, the Bank of Italy explained economic activities in the country appeared to have slowed down in the last quarter of 2018 already.
"The available cyclical indicators point to a possible decline in economic activity in the last three months of the year (2018), after the interruption in growth registered in the third quarter," it stated.
Such decline followed in fact a slight 0.1 percent drop in the country's GDP in the Q3 of 2018 due to a fall in domestic demand.
One factor sustaining the latest, less optimistic projections was linked to the survey carried out by the Bank of Italy among firms operating in the country in December.
"According to the assessments of firms (gathered among about 1,000 companies), investment is expected to continue to expand in 2019, although at a slower pace than in 2018," the report stated.
Firms involved in the survey felt less optimistic about the prospects of the demand and the general economic conditions, and a deterioration of assessments was registered across all sectors of activity.
"Even the outlook for the first quarter of 2019 worsened, owing above all to heightened uncertainty over economic and political factors," it noted.
Finally, the Bank of Italy forecast inflation should gradually rise from 1.0 percent in 2019 to 1.5 percent averagely in 2020 and 2021, following an increase in private sector wages.
