Italy’s growth destined to lag, warns OECD

By Stewart Fleming

Date: 19/05/05

Italy has been warned by the Organisation for Economic Co-operation and Development (OECD), that it may have to cut its national budget further in order to reach its official budget deficit goal of 2.7% of gross domestic product (GDP).

The OECD paints a guardedly optimistic picture of the immediate outlook. Although figures for the last two quarters' growth in GDP show Italy is now in recession again, the OECD says that: "Italy is enjoying a modest recovery which is set to continue at a moderate pace in 2005-6. But," it adds, "structural problems mean that Italy's real growth rate will remain slower than the EU average."

On the day that the Italian government cut its 2005 growth forecast for GDP for the second time, to 0.6%, Barclays Capital said that it was worried that its 0.5% forecast for 2005 "could now be too strong in the light of the very weak first quarter and signs that things are not looking any better in the second".

The OECD paints a bleak picture of Italian industry. "The manufacturing sector has yet to emerge convincingly from a four-year long recession," it says. Traditional textiles and shoe manufacturing sectors are "losing out to Asian and Eastern European rivals," the report adds.

Medium-term growth prospects "seem poor mainly because productivity growth and competitiveness remain weak," the report says, adding that "the opportunity (Italy had) to restructure after the advantageous conditions obtained at the time of European Monetary Union entry [Italy joined EMU with an undervalued exchange rate] has been only partially seized".

The Organisation for Economic Co-operation and Development (OECD) on 18 May 2005 published its 2005 Economic Survey of Italy, in which it warns the country that it may have to cut its national budget further in order to reach its official budget deficit goal of 2.7% of gross domestic product (GDP).

OECD: Italy: Economic Survey of Italy 2005 http://www.europeanvoice.com/article/imported/italy-s-growth-destined-to-lag-warns-oecd/52353.aspx

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