Italy: Economy loses some steam in Q4
GDP grew 0.3% over the previous quarter in Q4 in seasonally- and working-day adjusted terms, according to an advance estimate released by the National Statistics Office (ISTAT) on 14 February. The result came in slightly below the 0.4% growth recorded in Q3 and below market analysts’ expectations of another 0.4% increase. According to the press release, the expansion in Q4 was largely driven by growth in the industrial and service sectors; it was restrained, however, by a contraction in the agricultural sector.
In annual terms, GDP grew 1.6% in Q4, marginally down from Q3’s 1.7% expansion. Q4’s reading brings growth for 2017 to 1.5%, notably up from the 1.1% growth in 2016 and marking the highest reading in seven years. However, despite the ongoing recovery, GDP volume in fourth quarter of 2017 was still almost 6% lower when compared to in the first quarter of 2008.
Industrial production continued to grow at a healthy pace in Q4, expanding an average of 3.5% in annual terms, down from an average growth rate of 4.2% in Q3. Moreover, both business and consumer confidence were robust in the quarter, likely benefiting from further improvements in the still-troubled banking sector. On the demand side, preliminary data indicated that both domestic and external demand continued contributing to economic growth. More detailed national accounts data will be released on 1 March.
Despite the consolidation of the recovery, long-standing problems continue to weigh on Italy’s economic performance. These include the second-highest public debt-to-GDP ratio in the European Union, sluggish productivity growth, high taxes and inefficient institutions. Compounding these is a weak banking system, legacy of the last global financial and economic crisis. The economy is nevertheless expected to maintain a reasonable pace of expansion in 2018. Low inflation and further improvements in the labor market will support household spending, while fixed investment should continue growing thanks to favorable financing conditions.