|After contracting during most of 2014, the economy is projected to return to growth by mid-2015 and accelerate somewhat further in 2016. ECB monetary policy support is expected to ease financial conditions and facilitate a resumption of bank lending, which should raise investment. The projected revival of Italy’s export market will also support stronger growth. The overall impact of fiscal policy will be small in 2015, as tax cuts will be offset by spending reductions. Unemployment will begin to decline in 2016, but is set to remain at high levels, while wage gains look set to remain modest.
To support economic growth, the government has appropriately delayed fiscal consolidation and has completed some initial steps in its comprehensive programme of structural reforms. This programme, along with effective implementation of earlier reforms, needs to be pursued with determination if stronger growth is to be sustainable. The very high public debt ratio poses a significant vulnerability, and as growth improves higher tax revenues should be channelled entirely to deficit reduction.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.