Italy in recession after economy shrinks in Q4 2018

Andrew Cummings
February 2, 2019

ISTAT said in November the budget would support private consumption this year, and forecast growth of 1.3 percent, but since then the global outlook has darkened.

It is the third recession for Italy in a decade.

The EU's third-largest economy shrank more than expected in the last quarter of 2018 and recession has been signalled as that followed a contraction in the previous quarter.

The stagnant eurozone economy suffered another setback today with the news that the Italian economy had tipped into recession.

That was the same rate as in the third quarter, which had been the lowest for four years, while the euro zone's 1.2 percent year-on-year expansion was a new five-year low.

In separate figures released by Eurostat, unemployment in the eurozone remained at 7.9%.

Growth in Germany fell from 2.2 percent in 2017 to 1.5 percent a year ago, while government economists on Wednesday predicted a gain of just 1.0 percent in 2019.

Italy's coalition government was forced to revise its expansionary 2019 budget last month after the European Commission raised concerns about the impact on Italy's debt levels. The government wants to ramp up spending to get the Italian economy going by providing more social security payments and rolling back a pension reform.

But Italian Prime Minister Giuseppe Conte blamed the trade spat between the U.S. and China, which he said affected Italy's exports.

"This confirms what most observers were expecting, but this announcement means there is no doubt", Giuseppe Ciccarone, a professor of political economy at Rome's La Sapienza University, told Xinhua.

He mentioned the economic slowdown in Italy's major trading partners, adding that he believes the Italian economy will recover in the second half of 2019.

Germany, Europe's biggest economy, suffered an unexpected contraction in the third quarter largely because of changes in emissions standards that dented vehicle sales.

Andrew Harker, an associate director at IHS Markit, which compiles PMI, said on January 2 that the manufacturing slump was a "worrying end to the year for Italian manufacturers, with firms continuing to struggle to secure new business". 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 US and China.

Separate economic indicators point to further weakness at the start of 2019 and most economists expect a hard period ahead if the main causes of uncertainty are not addressed soon.

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