Tuesday, 12 July 2016

Italy economy: IMF says country has 'two lost decades' of growth


  • 1 hour ago
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  • From the sectionBusiness
Headquarters of Monte dei Paschi di Siena BankImage copyrightAFP
Image captionProblems with Italy's banks are not helping the economy
Italy's economy will not return to the levels seen before the 2008 financial crisis until the mid-2020s, the IMF has said, implying "two lost decades".
By the mid-2020s, it says the economies of other eurozone members will be 20-25% larger than levels seen in 2008.
The Fund's comments came as it cut its growth forecasts for the eurozone's third largest economy.
It now expects Italy's economy to grow by less than 1% this year, compared with an earlier estimate of 1.1%.
The IMF also cut its growth forecast for 2017 to about 1% from 1.25%.
Italy has an unemployment rate of 11% and a banking sector in crisis, with government debt second only to that of Greece.
Italian banks are weighed down by massive bad debts, and may need a significant injection of funds.
The IMF said any recovery in the Italian economy was likely to be "fragile and prolonged", adding that the authorities faced a "monumental challenge".
"The recovery needs to be strengthened to reduce high unemployment faster and buffers need to be built, including by repairing strained bank balance sheets and decisively lowering the very high public debt."
Last week, the IMF cuts its growth forecast for the eurozone as a whole because of the expected impact of the UK voting to leave the EU.
It now expects the eurozone's economy to grow by 1.6% this year and 1.4% in 2017. Before the referendum the IMF had predicted growth of 1.7% for both years.

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