ROME, April 12 (Xinhua) -- Most indicators show Italy's economy is starting what could be its fourth consecutive quarter of negative economic growth. Economists said there will be little relief until at least the second half of the year.
The Italian economy contracted over the last two quarters of last year, which means it officially entered into recession. Though a full data set for the first quarter of this year are pending, leading indicators such as internal demand, manufacturing, and exports point to another likely contraction. Analysts said there is little reason to believe the situation will improve in the second quarter.
"It's clear that the near-term prospects for Italy's economy are not optimistic," Pietro Reichlin, an economist with Rome's LUISS University, told Xinhua. "Other economies are suffering, which hurts a major exporter like Italy. There's a lack of internal demand, too many economic sectors operating under capacity. Yields on government debt are too high. Reforms are stalled."
Reichlin said that one advantage the economy had six months ago is now gone: "The two political parties in the government had been working together and providing some political stability," he said. "Now they are at odds. Never mind if one or the other has better ideas since both sides are undermining the other."
Reichlin was referring to the populist, anti-establishment Five-Star Movement and the euro-skeptic, anti-migrant League, which formed a coalition to support the government of Prime Minister Giuseppe Conte last year.
Foreign investment banks, ratings agencies, and multilateral organizations have taken note of the country's economic troubles. The consensus is that the Italian economy will contract for 2019 as a whole, far weaker than the 1.0- to 1.5-percent growth forecast as recently as December.
Lorenzo Codogno, founder and chief economist for LC Macro Advisors and a visiting professor at the London School of Economics, noted that while "soft" economic indicators like consumer confidence and business confidence are negative, "hard" indicators like gross domestic product growth or unemployment rates have held up better than the "soft" indicators might imply.
"This is one bright spot, which is that despite all the obstacles and all the negative news the economy has shown a surprising resilience," Codogno said in an interview.
Codogno says his own economic models predict Italy's economy will contract by 0.5 percent this year, more bearish than the consensus estimates. But he said the economy is in the midst of what will be its worst stretch for the year, and that it would return, slightly, to positive growth in the second half of the year.
"To say there will be a 0.5-percent contraction sounds pessimistic but I think there's an upside to what my economic models show in that the economy will return to growth this year," Codogno said.
Reichlin agreed that the second half of this year could look better than the first half. Like many analysts, he expects next month's elections for European Parliament to shift the balance of power in the government, strengthening the hand of one of the parties supporting the government at the expense of the other. Polls show the League will likely come out ahead.
"One small positive note is that instead of two parties undermining each other, it's likely one will emerge as the dominant party and will be able to pursue an agenda," Reichlin said. "I won't speculate on whether the agenda will be good for the economy or bad. But it could be better than the current situation."
