Connect with us

Hi, what are you looking for?

Capital Business
Capital Business

World

Italy recession may stretch into 2010

WASHINGTON, February 7 – The International Monetary Fund said Friday that the possibility of Italy\’s economic recession stretching into 2010 "cannot be ruled out" amid the global slump and financial crisis.

"In line with the rest of the euro area, Italy is being severely affected by the worsening economic environment, although its financial sector has remained relatively resilient," the IMF said in its country report on Italy.

"The economic recession is deepening, and, while a gradual recovery is expected in 2010, the possibility of a prolonged downturn cannot be ruled out.

"The economy\’s recovery, however, is likely to be slow and weak, reflecting underlying structural rigidities, lack of domestic competition, and the limited scope for a fiscal response," the IMF said after completing a review of Italy\’s economy.

The 185-nation IMF routinely conducts the reviews, known as IV consultations, with member countries.

The IMF confirmed in the report its outlook for the Italian economy, published on January 28, projecting three consecutive years of contraction in gross domestic product (GDP), a broad measure of economic activity.

According to the IMF, Italy\’s GDP contracted an estimated 0.6 percent in 2008 and will shrink 2.1 percent in 2009 and 0.5 percent in 2010.

The Washington-based institution expressed concern about Italy\’s ballooning public deficit, which it forecast would reach 2.7 percent of GDP this year and 3.9 percent of GDP in 2010.

Following "exceptionally strong revenues" in 2006 and 2007, "the revenue-based fiscal consolidation has come to an end," the IMF warned, projecting that public debt would swell to 105.6 percent of GDP in 2009 year and to 109.4 percent of GDP the next year.

Advertisement. Scroll to continue reading.

The IMF, which has called on Italy in recent years to undertake structural economic reforms, stressed "the importance of reducing regulation, increasing competition, and improving the business environment to raise Italy\’s productivity and growth potential."

The policies of Silvio Berlusconi\’s government won praise in the evaluation.

The IMF hailed "the progress made in improving Italy\’s fiscal frameworks" and the government\’s anti-crisis fiscal package, which "takes into account the limited room for fiscal stimulus, and focuses on temporary, targeted, and timely measures, as well as on accelerating public investment projects."

"The financial system has weathered the global turbulence, although vulnerabilities have increased. While banks came under pressure, the system as a whole remained solid, and no institution failed or fell short of regulatory requirements," it said.

The IMF noted that the system\’s resilience "reflects its relatively safer risk profile, which was supported by a firm regulatory and supervisory environment, strong intervention and resolution frameworks, and pre-existing high levels of depositor protection.

"However, vulnerabilities have risen, related to banks\’ capitalization, funding, credit quality, profitability, and exposure to Central and Eastern Europe," it warned.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...