Weeks after the conclusion of a budget deal between Italy and the European Commission there are signs that the Eurozone’s third-largest economy is edging towards recession as the Bank of Italy has reduced its 2019 growth projections from 1% to 0.6%, while growth will remain low at 0.9% in 2020 and 1% in 2020.
The Central Bank warns that the Italian economy’s negative outlook means there could be a further downward revision. According to Italy’s National Statistical Service, the country registered negative growth in the third quarter of 2018, which continued through the rest of the year. If the trend continues, Italy would be the first major economy in the Eurozone to reenter into a recession after a period of positive growth
The downward growth trend in Italy is driven by weakening domestic demand, which saw the Italian government lower its 2018 growth projection from 1,5% of GDP to 1,2%. Italy’s unemployment rate jumped from 10,3% in September to 10.6% in October.
In the third quarter of 2018, consumer spending fell by 0.1% and investment by 1,1%.
The anti-establishment Italian government has fought hard with the European Union over its 2019 budget proposal, which Rome says will provide a necessary stimulus to Italy’s stagnating demand and will reset the economy on a growth trajectory.