Italy GDP stagnated in fourth-quarter 2014, held back by weak domestic demand

February 13
6:58 AM 2015

Italy's economy stagnated at the end of last year, marking the 14th consecutive quarter without any growth as an increase in exports was offset by weak domestic demand, data showed on Friday.

Italy has been the euro zone's most sluggish economy for over a decade and is widely forecast to continue to lag its peers, even though it is expected to see a return to modest growth this year for the first time since 2011.

Gross domestic product was unchanged quarter-on-quarter in the fourth quarter following a 0.1 contraction in the third, and dropped 0.3 percent on an annual basis, national statistics bureau ISTAT reported.

That just beat an average forecast of a 0.1 percent fall quarter-on-quarter, down 0.4 percent annually, in a Reuters survey of analysts.

Over the whole of 2014, GDP fell 0.4 percent on a work-day adjusted basis, the third consecutive decline after contractions of 1.9 percent in 2013 and 2.3 percent in 2012.

Earlier on Friday, Germany reported a strong 0.7 percent quarterly GDP rise for the fourth quarter, while French GDP edged up 0.1 percent.

The expected Italian pick up is seen driven by favorable external developments -- the European Central Bank's bond-buying program, which will keep interest rates low; the depreciation of the euro, which will help exports; and the plunge in oil prices which cuts energy costs for firms and families.

However, opinions differ over just how big a boost Italy will get, as it is held back by structural problems including stifling bureaucracy, widespread corruption and inefficient justice and education systems.

Prime Minister Matteo Renzi, who took office a year ago after a power struggle within his ruling Democratic Party, set out an ambitious reform agenda covering all these areas, but has so far implemented little of his program.

Last week the Bank of Italy, the European Commission and ratings agency Fitch all forecast Italian growth this year of around 0.6 percent, which is also the government's most recent target.

Employers' lobby Confindustria is more upbeat. It forecast last month that the ECB's bond-buying plan alone would raise GDP by 0.8 percent this year and by a further 1 percent in 2016..

ISTAT gave no numerical breakdown of GDP components with its preliminary estimate. But it said exports had made a positive contribution to GDP, while domestic demand had been negative. It also said that services had expanded while industry and agriculture had contracted.

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