Italy's recession extended to third-quarter - Treasury chief economist

LONDON Tue Nov 12, 2013 3:46pm GMT

A woman buys fruit in a market in downtown Rome August 5, 2011. REUTERS/Tony Gentile

A woman buys fruit in a market in downtown Rome August 5, 2011.

Credit: Reuters/Tony Gentile

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LONDON (Reuters) - Italy's recession probably dragged on for the ninth consecutive quarter between July and September but will end in the fourth quarter, the Treasury's chief economist, Lorenzo Codogno, said on Tuesday.

The euro zone's third-largest economy contracted for eight straight quarters up to the second quarter, when gross domestic product shrank 0.3 percent. Third quarter GDP data will be released by national statistics bureau ISTAT on Thursday.

"Our current forecast is for a fall of 0.1 or 0.2 percent," Codogno told Reuters on the sidelines of a conference in London.

The forecasts are broadly in line with those of most independent economists. A Reuters survey of 18 analysts points to a fall of 0.1 percent, with forecasts spanning -0.2 percent to +0.1 percent.

The euro zone as a whole emerged from recession in the second quarter.

Codogno's boss, Economy Minister Fabrizio Saccomanni, has repeatedly said he expected Italy's economy to stabilise in the third quarter and return to growth in the fourth.

But recent hard data on industrial output and orders have been disappointing, failing to confirm signs of improvement in consumer and business confidence. Industrial output, which normally closely correlates with GDP in Italy, contracted by 1 percent in the third quarter.

Asked about the fourth quarter, Codogno told Reuters the Treasury's current forecast was for 0.3 percent growth, but "it could be higher" if companies made full use of the Treasury's recent payments of arrears to private sector suppliers.

He said growth as strong as 0.5 percent was plausible in the fourth quarter.

Looking ahead, Codogno said it was a "real concern" that Italian banks might further reduce credit to the real economy as a result of the European Central Bank's Asset Quality Review process.

The Bank of Italy warned on Tuesday that credit to firms and families would continue to contract in 2014, though at a gradually slower rate. <ID:L5N0IX3TP>.

Saccomanni is forecasting growth of 1.1 percent in 2014, but most analysts are less upbeat. The median forecast of more than 20 economists polled by Reuters last month pointed to 2014 growth of just 0.5 percent.

(Reporting by Marc Jones, writing by Gavin Jones; Editing by Hugh Lawson)

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Comments (1)
pavlaki wrote:
Funny how in the Euro zone it is always ‘jam tomorrow’ never now. I wonder what the excuse will be at the end of the third quarter when the fourth quarter looks poor?

Nov 12, 2013 2:51pm GMT  --  Report as abuse
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