The economic policy of the populist government in Italy does not do justice to the country’s difficult economic situation, according to the International Monetary Fund (IMF). The coalition is in danger of weakening the economy, warned the IMF in presenting its annual report on Italy, which was released today.
The government’s strategy does not foresee the reforms needed to overcome long-standing structural barriers to sustainable growth. The IMF praised the government’s plans to boost growth and promote social inclusion.
However, a planned pension reform and the introduction of a civic income could lead to new problems: the level of social benefits is very high compared to internationally proven models. The pension burden on the budget threatens to increase further; In turn, working income could result in lower labor market participation.
Italy trembles ahead of EU economic forecast
According to the news agency ANSA Italy, the European Commission wants to sharply reduce its growth forecast for the full 2019 year. In concrete terms, the forecasted growth of 1.2 percent of gross domestic product (GDP) in November should be reduced to just 0.2 percent, as ANSA reported today with reference to well-known sources in Brussels.
The officially outstanding forecast also takes into account the potential impact of the economic measures contained in the Italian budget. The government of Lega and five-star movement, which ruled in Rome since June, expects economic growth of one percent this year.
Italy’s gross domestic product (GDP) shrank by 0.2 percent quarter on quarter in the fourth quarter of 2018. In the third quarter, GDP had already fallen by 0.1 percent, so Italy slipped into a phase of „technical recession“. The term technical recession is used when GDP declines over two consecutive quarters.
Muted growth in EU
In Brussels, the presentation of the winter forecast is on the agenda tomorrow. Specifically, EU Commissioner Pierre Moscovici will present the parameters for economic growth, deficit and debt developments, unemployment and inflation in the EU. Recently, there had been positive data, but the upturn has diminished
