IMF slashes Italy's growth forecast to just 0.1 percent

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IMF slashes Italy's growth forecast to just 0.1 percent
The IMF predicts Italy will grow by just 0.1 percent in 2019. File photo: Giuseppe Cacace/AFP

The International Monetary Fund on Tuesday sharply lowered its growth outlook for the eurozone, as powerhouse Germany sputters while Italy looks set to miss out on growth altogether.


Gross domestic product (GDP) in the 19-nation single currency area should add just 1.3 percent this year, after 1.8 percent in 2018, the Washington-based institution said. At its last update in January, the IMF was still confident of 1.6 percent expansion in the bloc.

Many of the eurozone's woes have fallen on Germany and Italy, two of its top three economies, expected to expand by 0.8 and 0.1 percent in 2019. The IMF slashed both forecasts by 0.5 percentage points compared with January.


France's outlook was trimmed only slightly, to 1.5 percent, as the "yellow vest" protests that braked output in late 2018 have ebbed. And Spain remains a growth star among large eurozone nations, expected to expand by 2.5 percent this year.

Italy is suffering a "technical recession", or two successive quarters of contraction in late 2018.

Weak domestic demand is weighing on Rome, on top of a massive public debt burden amounting to 130 percent of GDP. Last autumn, the populist coalition government indulged in a brief showdown with Brussels over a deficit-swelling 2019 budget, before agreeing to trim its spending plans.

READ ALSO: Italian economy slips back into recession

Photo: Controluce/AFP

Further into the future, the IMF sees the eurozone economy picking up to 1.5 percent growth next year, with Germany adding 1.4 percent and Italy 0.9.

But the IMF joins the chorus of forecasters drawing a question mark over the impact of Britain's departure from the European Union. Its economists see three possible scenarios, an orderly withdrawal after a deal with Brussels, a partly cushioned no-deal in which effects like tariffs and blockades for financial firms would bite only gradually, or a chaotic no-deal upset causing immediate trade and financial havoc.

READ ALSO: Fears as Italian government targets huge gold reserves


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