Economy

PM says Italy economy probably contracted in Q4 2018

PM says Italy economy probably contracted in Q4 2018

Italy's Economy Minister Giovanni Tria on Thursday said the country's response its decline into recession in the second half of previous year must be to increase public investment, adding that all European Union countries should seek to bolster growth.

Output in Europe's fourth largest economy contracted 0.2% in the fourth quarter, on the heels of a 0.1% drop in the quarter before that.

The 19-state eurozone only progressed by 0.2 percent in Q4 2018, fueling debates on whether or not the figures will affect global scales.

Prime Minister Giuseppe Conte said on Wednesday the fourth quarter data would be negative, but added that conditions were in place for a recovery over the second half of this year.

Rome and Brussels agreed on a revised spending plan following the tensions between the two sides.

Italy is Europe´s second largest manufacturer and is now the only European Union member in recession, although growth in export powerhouse Germany also fell in 2018.

"The growth forecasts on which the budget was based have already been blown out of the water and euro-zone growth continues to weaken", said James Athey, a portfolio manager at Aberdeen Standard Investments in London.

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Deputy prime minister Luigi Di Maio, the head of the Five Star Movement, said the recession was proof that Europe's budget rules should be relaxed to allow Italy to stimulate its economy back to growth.

"The response can not but be to accelerate the public investment programme foreseen by the government", Tria said in a statement.

Italian GDP data showed the country is now in a technical recession.

The EU statistics agency Eurostat said the eurozone expanded by 1.8% in 2018 overall, the slowest rate of growth since 2014 and significantly down from 2017's 2.3%. 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. That was the same growth rate as in the third quarter and was in line with expectations, showing growth stuck at its lowest rate in four years. As a result, unemployment in the eurozone is about double the U.S.'s 4 percent at 7.9 percent.

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.

This latest round of economic reports, combined with some weak statistics in early 2019, bodes poorly for the eurozone as a whole.


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