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Italy’s GDP to drop by 1.5% in 2012

An Italian national statistics agency has forecasted that Italy’s GDP would fall by 1.5 percent in 2012 but will slightly rise by 0.5 percent next year.

Italy’s GDP is expected to fall by 1.5 percent in real terms this year as a result of “a reduction in domestic demand which is only partially offset by the positive contribution of external demand,” said a report issued by Italian National Institute of Statistics (Istat).

Istat also reported that total investment is forecast to drop substantially as a result of tighter credit conditions and negative economic sentiment, while the import growth would turn strongly negative in 2012.

Private consumption is also projected to fall, according to the report, reflecting a decline in the purchasing power of households and the rising unemployment. At the end of 2012, Italy’s unemployment rate is expected to be at 9.5 percent, up from 8.4 percent of last year.

In 2013, Italy’s GDP should see a growth of 0.5 percent as long as stronger global trade sustains export growth, according to the institute. In the meantime, with private consumption and investment remaining weak, it is estimated that domestic demand’s contribution to output growth is next to nothing.

However, Istat said the outlook is subject to a number of downward risks. “A revival of financial tensions, widening sovereign credit risk spreads and a slower-than-expected global trade recovery could lower GDP growth significantly,” said the report.

Source: China Daily