Italian Economy's Forecasted 2015 Growth Rate Rises

July 2, 2015Italyby EW News Desk Team

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According to employment lobbying organization, Confindustria, Italy’s economy will grow 0.8 percent for the year, an uptick from an original assessment of 0.5 percent. Next year’s growth outlook went from 1.1 percent to 1.4 percent. However, the growth is attributed primarily to such outside factors as monetary easing and low oil prices. The growth marks the end of three years of economic downturn.

Italy’s economic gains may be good news, but the fact that the economy’s success hinges on events outside of the nation’s control does not bode for well for Prime Minister Matteo Renzi and his center-left government. Renzi has been trying to lift his country out of a recession not seen in decades, but Italy shows no sign of advancing in the long-term. Confindustria further notes that Italy will only return to its 2007 economic status by the time 2023 arrives.

Italian Job Market

Italy will also suffer from long-term unemployment issues, with Italian joblessness hitting a near 40-year high in 2014, notes Business Insider. Unemployment is also expected to rise until 2020. Record unemployment continues in 2015, and youth unemployment shot to 43.1 percent in February 2015. Italy’s government has commenced labor market reforms to spur job growth, but the problem is that employers are not hiring until there are clear signs that the economy is recovering.

Although Italy is recovering to a degree, a slight boost from external events is not enough to give employers the necessary confidence. Internal gains have yet to come to fruition, dampening business morale. On the wage front, hourly wages went up 0.2 percent in May, and wages on a yearly level climbed 1.1 percent that same month. Public sector wages remained stagnant, while private sector wage growth went up 1.6 percent. Italy ranks second in the European Union in terms of equal pay among genders, but Italian wages have been below the wages of other EU nations.

The Greece Factor

Many fear that Greece’s dire situation will have a contagion effect throughout Europe, but Italian finance minister Pier Carlo Padoan stresses that Greece will have no effect on Italy’s economy. He also stated that Greece’s default will not affect Italy’s debt in any fashion. Italian debt stands at over 132 percent of GDP, and the debt will only fall to 131.9 percent in 2016. Italy has the second highest debt in the Eurozone after Greece. Greece entered default after Germany refused any further negotiations, and Greece became the first advanced economy to enter default. The Confindustria report does not take into account Greece’s effect on the Eurozone and Italy.

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