News Analysis: Bank of Italy's positive growth estimate "small piece of positive news"

Source: Xinhua| 2019-04-20 04:40:30|Editor: Mu Xuequan
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By Eric J. Lyman

ROME, April 19 (Xinhua) -- News that Italy's economy grew, just slightly, in the first quarter of the year was welcomed in government circles. But analysts said it was unlikely to be the start of an economic recovery.

On Thursday, the Bank of Italy's quarterly economic bulletin estimated that the country's economy grew 0.1 percent over the first three months of this year. It was the first time the economy grew over an economic quarter since the second quarter of 2018.

The Bank of Italy's data will not be included in the report on economic growth be released April 29 by the country's National Statistics Institute, or ISTAT, but the two figures usually move in step with each other.

The development provides a much-needed dose of good news in Italy, which has been suffering from slow economic growth and political uncertainty.

"The growth figure for the first quarter was modest but better than almost anyone could have expected," economist Giampaolo Galli, vice-director of the Italian Observatory of Public Accounts, a watchdog group.

Galli told Xinhua the government's 0.2-percent growth estimate for 2019 as a whole now seems more realistic. In recent weeks most estimates from investment banks, ratings agencies, and multilateral groups have predicted no growth or sometimes negative growth for the full year.

"A few days ago, before the Bank of Italy's estimate came out, Minister of Finance Giovanni Tria said that in order to reach the 0.2-percent growth target for the year as a whole we would have to see a dramatic increase in the second half of the year," Galli said. "Now, it looks like the growth target is realistic even without a dramatic change."

To be sure, the government's 0.2-percent target is a low one, especially compared to its predictions of 1.5-percent growth as recently as last November. In December, the consensus among analysts was that the economy would grow 0.7 percent this year.

Fedele De Novellis, head of the macroeconomic forecasts and analysis team at REF Research, agreed that the higher-than-expected growth figure was positive news but said it was "a small piece of positive news".

De Novellis, speaking in an interview with Xinhua, warned: "We aren't seeing any big change here."

He said the economy was still moribund, adding that until soft indicators like business confidence and consumer confidence begin to improve, the situation would not change too much.

"The most positive thing we can say is that the situation has stopped getting worse," De Novellis said. "But it isn't getting better and it won't start to get better for a sustained period until the economy is reformed."

Galli agreed, He said the economy is hindered by companies' aversion to investments to expand and upgrade their capacities. He attributed that to "political incertitude" that has gripped the country since the installation of the government under Prime Minister Giuseppe Conte last year.

"Companies are holding their money tight out of fear the situation could get worse before it gets better," he said. "Until that changes, I can't see how we will see more than modest economic growth."