GDP in Italy

Italy GDP (EUR bn) | Economic News & Forecasts

Italy - GDP (billions of Euros)

Economy shrinks in final quarter of 2019, wrong-footing markets

In the fourth quarter of the year, Italy’s GDP contracted 0.3% over the previous period in seasonally- and working-day adjusted terms, according to an advance estimate released by Italy’s Statistics Institute (ISTAT) on 31 January. The result, which marked the first quarterly contraction following one year of substantial stagnation, as well as the sharpest drop in close to seven years, surprised on the downside; analysts had expected the economy would grow 0.1%. According to the accompanying press release, Q4’s reading reflected lower production in the industrial and agricultural sectors, while output in the services sector was virtually flat. Meanwhile, in annual terms, the economy flatlined in Q4, down from the third quarter’s 0.5% expansion. The fourth quarter’s result brings full-year growth for 2019 to 0.2%, down from the 0.7% expansion clocked in 2018 and marking the softest reading since 2014.

On the demand side, preliminary data indicated that domestic demand weighed on growth in the quarter, outweighing the positive contribution from the external sector—which nonetheless looks set to have been modest due to the challenging external backdrop. Moreover, policy and political uncertainty and gloomy demand prospects hit business investment, which is further corroborated by anemic credit growth throughout the quarter. Household spending, meanwhile, likely weakened from the previous quarter, as suggested by muted wage growth, labor market slack and a rising savings ratio in the face of political and economic uncertainty. More detailed national accounts data will be released on 4 March.

Commenting on the outlook, Loredana Federico, chief Italian economist at UniCredit, stated:

“Concern remains with regard to the prolonged weakness of the industrial sector (three quarters in recession) and its negative impact – mainly via a deterioration in labor market indicators – on domestic demand and, thus, services and retail activity. However, the degree to which this negative spillover will play a role is still uncertain.”

Growth should pick up some modest steam this year, thanks to somewhat stronger domestic demand and as the industrial sector struggles out of recession. Nevertheless, Italy will continue to lag behind its EU peers, weighed down by lackluster investment and muted productivity growth. Long-standing problems cloud Italy’s outlook, and much-needed pro-market reforms and political stability will most likely remain elusive under the current governing coalition, which comprises of a fragile alliance between the center-left Democratic Party and anti-establishment Five Star Movement. Of particular concern, the country’s burdensome public debt load, coupled with undisciplined government spending and political instability, could trigger renewed financial turbulence.

FocusEconomics panelists project growth of 0.4% in 2020, which is unchanged from last month’s forecast, and 0.6% in 2021.

Italy - GDP (EUR bn) Data

2014   2015   2016   2017   2018  
GDP (EUR bn)1,623  1,651  1,691  1,729  1,757  

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Italy Facts

Value Change Date
Bond Yield1.31-0.40 %Jan 01
Exchange Rate1.120.65 %Dec 31

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