December 4, 2022

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Italy gets a GDP boost as government pledges measures to tackle inflation By Reuters

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©Reuters. FILE PHOTO: A woman shops at Campo de’ Fiori market in Rome, Italy June 15, 2022. REUTERS/Guglielmo Mangiapane

By Gavin Jones and Giuseppe Fonte

ROM (Reuters) – Italy’s economy performed better-than-expected in the third quarter, data showed on Monday, offering a welcome boost to the country’s new government as it plans additional loans to help families and businesses cope with rising inflation help.

Gross domestic product grew 0.5% in the third quarter from the second and 2.6% year-on-year, according to the national statistics agency ISTAT.

Both preliminary readings were about half a percentage point higher than the Reuters poll of analysts had expected, while the Treasury said last month it expected a decline in the third quarter.

Resilience in the services sector supported domestic demand, ISTAT said.

However, industry shrank and trade flows stunted growth, and the outlook is clouded by sky-high, energy-driven inflation, exacerbated by the war in Ukraine, which has eroded business and consumer confidence, sapped investment and hit families’ spending power Has .

In his first speech since taking office this month as economy minister in Giorgia Meloni’s nationalist government, Giancarlo Giorgetti said on Monday the government would reduce the budget deficit and huge national debt in the coming years but promised more spending in the short term.

The government plans to widen the budget deficit to 4.5% of GDP next year from the 3.4% forecast last month amid current trends, a senior official said. That would give Meloni scope for nearly €21 billion ($20.8 billion) in expansionary measures.

Italy will set new economic and public finance targets at its next cabinet meeting, which is expected to take place on November 4, Meloni told reporters on Monday.

RECESSION COMING?

Noting that Germany and France had already announced “large-scale measures” of economic support to deal with the energy and inflation crises, Giorgetti of the right-wing League party said Italy need not be afraid to do the same.

“We strongly believe that families, especially the most vulnerable, need to be protected from rising energy bills and the cost of living,” he told a banking conference in Rome.

Meloni took office promising tax cuts and higher pensions at the head of a coalition government formed after national elections on September 25.

GDP in the eurozone’s third-largest economy has beaten expectations in each of the first three quarters of this year, but Unicredit (BIT:) economist Loredana Federico said her bank still expects a recession around the turn of the year, with Italy “particularly vulnerable to it.” Europe’s energy crisis.”

Italy’s inflation hit 12.8% in October, the highest level since the country’s EU-harmonized index began in 1996.

Federico said a good summer for the tourism sector was likely to boost growth between July and September in a country where around 13% of GDP is linked to tourism, and forecast a 0.5% fall in GDP in the fourth quarter.

Full year growth this year will be 3.7%, Federico predicts, ahead of Rome’s official target of 3.3%.

($1 = 1.0112 euros)

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