Economy

Italy in recession after economy shrinks in Q4

Italy in recession after economy shrinks in Q4”

This means Italy is officially in recession, which is defined as two successive quarters of economic contraction.

While Prime Minister Giuseppe Conte insisted on Thursday that the economy would bounce back this year, other worrying economic signs, such as a manufacturing slump and the slowdown in Germany, suggest growth may not come back as fast as he predicts.

The Italian economy contracted in the fourth quarter of 2018, dragged down by slowing European growth and global trade tensions, plunging the country into a technical recession, official data showed Thursday.

Germany, France and Italy are the three largest economies in the eurozone. While the recession may prove short-lived, the latest round of bad news is likely to test market confidence in the government's expansive program for 2019. He said that could happen "particularly if euro zone growth continues to disappoint".

Italy's economy suffers from a chronic growth weakness and can't keep up with the economy in the Euro zone for a Long time.

The European Commission rejected the plan at first, but Rome and Brussels eventually reached an agreement to avert an infringement procedure when the government pledged to reduce the budget deficit for next year to 2.04% of GDP, having initially pencilled in a 2.4% deficit. Deputy Premier Luigi Di Maio said in a Facebook post that the Democratic Party-led previous governments "lied to us, never brought us out of the crisis".

Andrea Iannelli, an investment analyst at the fund manager Fidelity International, said the government was right to highlight falling demand from its neighbours and trade wars for the country's woes.

"The sell-off in Italian assets and rise in yields is now feeding through into tighter lending conditions and weaker macro data", he said. The German government says its economy will expand just 1 per cent in 2019, the slowest pace in six years. And uncertainty over Britain's exit from the European Union has weighed on sentiment, as has the fear of a global trade war stoked largely by growing tensions between the USA and China. The average forecast in a Reuters survey of analysts had pointed to a 0.1 percent fall quarter-on-quarter, up 0.3 percent year-on-year.

According to Andrea Fumagalli, a political scientist and economist at the University of Pavia, the biggest problem stemming from the weak economic data of 2018 is what it implies about this year.

The jobless rates fell slightly in Italy and Spain, which still have the highest unemployment levels in the eurozone after Greece.



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