Xinhua, Rome :
A lack of investor confidence in Italy’s new government started to weigh on economic growth prospects in the second quarter of the year, economists told Xinhua, though the consensus is that it is still too early for government policies to have a direct impact on the country’s economic performance.
Investors were already feeling jittery heading into the country’s March 4 general election, pushing interest rates on government bonds higher. Higher interest rates, a sign that investors see more risk in the country, raise borrowing costs for the Italian treasury and reduce its spending power.
Since the June 1 installation of the government following weeks of difficult negotiations, interest rates have pushed even higher: the spread -the difference in interest rates in Italy compared with Germany, Europe’s biggest economy – was higher than normal at 130 basis points in March. They have now surged to more than 240 basis points, a level some economists say is unsustainable over a long period of time.
According to Stefania Tomasini, head of Italian economic modeling with Prometeia Associazione, a consultancy, those developments have so far had a limited impact on economic growth.
“There is no direct impact yet with the government in power for so little time,” Tomasini told Xinhua. “Borrowing costs are higher but that is based on faith in the government.”
Tomasini said Prometeia modeling predicts the economy will show growth of just 0.2 percent for the three-month period that ended June 30. That’s below the 0.3-percent growth rate in the first quarter versus the previous period as well as the predicted 0.3-percent growth the consultancy expects for the July-to-September period.
Prometeia is predicting 1.2-percent growth for 2018 as a whole, lower than most estimates. For next year, predictions range from 1.1 percent (the IMF) to 1.4 percent (Bank of Italy), with Prometeia models showing 1.2-percent growth.
In comparison, the European Commission predicts the 19-nation eurozone to grow by 2.3 percent this year and 2.0 percent in 2019. Italian economic growth has trailed that of the eurozone as a whole in all but one year since the euro currency was introduced in 2002.
A lack of investor confidence in Italy’s new government started to weigh on economic growth prospects in the second quarter of the year, economists told Xinhua, though the consensus is that it is still too early for government policies to have a direct impact on the country’s economic performance.
Investors were already feeling jittery heading into the country’s March 4 general election, pushing interest rates on government bonds higher. Higher interest rates, a sign that investors see more risk in the country, raise borrowing costs for the Italian treasury and reduce its spending power.
Since the June 1 installation of the government following weeks of difficult negotiations, interest rates have pushed even higher: the spread -the difference in interest rates in Italy compared with Germany, Europe’s biggest economy – was higher than normal at 130 basis points in March. They have now surged to more than 240 basis points, a level some economists say is unsustainable over a long period of time.
According to Stefania Tomasini, head of Italian economic modeling with Prometeia Associazione, a consultancy, those developments have so far had a limited impact on economic growth.
“There is no direct impact yet with the government in power for so little time,” Tomasini told Xinhua. “Borrowing costs are higher but that is based on faith in the government.”
Tomasini said Prometeia modeling predicts the economy will show growth of just 0.2 percent for the three-month period that ended June 30. That’s below the 0.3-percent growth rate in the first quarter versus the previous period as well as the predicted 0.3-percent growth the consultancy expects for the July-to-September period.
Prometeia is predicting 1.2-percent growth for 2018 as a whole, lower than most estimates. For next year, predictions range from 1.1 percent (the IMF) to 1.4 percent (Bank of Italy), with Prometeia models showing 1.2-percent growth.
In comparison, the European Commission predicts the 19-nation eurozone to grow by 2.3 percent this year and 2.0 percent in 2019. Italian economic growth has trailed that of the eurozone as a whole in all but one year since the euro currency was introduced in 2002.
