Italy In Recession Again?

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Italy In Recession Again?

Recent predictions that Italy was moving towards economic success and renewed growth have proved false as the country is now back in recession. Italian government statistics published on 31 January 2019 showed reductions to levels of investment, high unemployment and public debt totalling around 130% of GDP.

These alarming stats should cause any European investor to take great care prior to any Italian equity purchases.

Italy Staggering Into Recession?

Fabio Franceschi, the owner of the largest printing house in Italy, Grafica Veneta, commented: “The country is in the hands of a couple of kids.” He pointed to recent official statements that Italy was on the brink of a boom and said the country is at “tipping point“.

Mr Franceschi feels the current leadership of Di Maio and Matteo Salvini is failing in a number of ways and blames a lot of this on business uncertainty due to very little by way of investment sweeteners from the government. He went on to add: ” … we are becoming an uncivil country. There is no focus on business and job creation. As for the rowing with France – we should never compare ourselves to other countries. France has a credibility that we don’t have at this moment“.

Many senior economists share the same view and feel Italy is highly likely to become the next eurozone crisis location if things don’t change.

Increased consumer poverty and reductions to government spending and investing are all likely to increase Italian woes further. Italy had major problems getting its budget passed by the EU due to its enormous debt, but positive 2019 forecasts for increases to Italian GDP managed to swing the issue. These positive statements seem unlikely to materialise, however, and this is likely to increase the burden of Italy’s massive debts.

Lorenzo Codogno is currently teaching at the London School of Economics and used to be Chief Economist with the Finance Ministry. He says: “All the leading indicators suggest the first quarter of the year will be as bad as the last, and the second quarter will be flat. It’s likely things will pick up from there, but even then, it will mean the economy finishes the year in a weak position.