Bank of Italy cuts growth forecast for two years

Bloomberg

The Bank of Italy cut its growth forecast for this year and next while signalling that the euro region’s third-biggest economy might have slipped into a new recession at the end of 2018.
The economy is seen expanding 0.6 percent this year and 0.9 percent next, down from prior projections of 1 percent and 1.1 percent respectively, the central bank said in its quarterly economic bulletin.
“New data have been published on international trade, economic activity and business sentiment in Italy and the euro area that generally indicate a less favorable development in the global and Italian economy,” the report also said.
Italy has been struggling to break out of a years-long trap of economic stagnation, though the European Commission projects the country will have the slowest growth rate in the 19-nation euro area this year and next. The populist government is counting on its expansive budget and programs to spur economic growth.
Italy’s bonds reduced gains after the release of the central bank’s report, with the 10-year yield rising to 2.76 percent. That pushed the spread or difference with equivalent German bunds to about 250 basis points. That is approximately 75 basis points below a November peak.
The revised outlook shows a marked reduction of the estimated investments this year to a 0.6 percent rise from a 2.1 percent increase previously for-ecast. The projection for household consumption’s rise in 2019 was cut to 0.6 percent from a 1 percent increase prior.
The central bank said that economy may have shrunk at the end of last year, de facto signaling that the nation slipped into recession, after a 0.1 percent contraction in the third quarter.