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Italy escapes recession but still lags behind rest of Europe

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Italy escapes recession but still lags behind rest of Europe
Italian industrial output increased slightly in the first months of 2019. Photo: Miguel Medina/AFP
16:47 CEST+02:00
Italy's economy has grown enough to drag it out of recession, but the country's problems are far from over.

Italy's economy returned to growth in the first quarter of 2019 after two quarters of contraction – a technical recession - giving the government a boost ahead of European elections.

Gross domestic product expanded by 0.2 percent in the three months to March, the Istat statistics office reported on Tuesday.

The return to slender growth was heralded by surprisingly positive industrial output figures in January and February after months of contraction.

Year-on-year GDP growth was 0.1 percent, Istat said, buoyed by all sectors including agriculture, industry and services.

Italian GDP growth still lagged behind that of the wider Eurozone area, which achieved faster-than-expected growth in the first quarter of the year, increasing by 0.4 per cent, according to Istat.

Photo: Andreas Solaro/AFP

Last year's technical recession had put pressure on the populist government n the eurozone's third largest economy, which took power in June on the back of big-spending electoral promises.

Italy is Europe's second largest manufacturer and was the only European Union member in recession, although growth in export powerhouse Germany also halted in late 2018.

Istat said that the 2019 growth had been driven by exports, while warning that domestic demand remained weak.

The Italian economy suffered a harsh recession in 2012-13 and has managed only slow growth since then. Overall growth for full-year 2018 was just 0.8 percent.

READ ALSO: Juncker warns Italian government over its struggling economy

Italian Prime Minister Giuseppe Conte said: "Italy is growing again, the ISTAT GDP data is a great comfort to us on the budget and the measures we have adopted, taking into account the difficult international context and with the latest measures not in force yet.”

"We hope that in the second quarter the economy can grow in a sustained way,” he said, adding that it was “not time to speak of tax reform.”

He also called for a bigger crackdown on tax evasion and avoidance.

Italy's finance minister has previously predicted zero growth for the country's economy overall in 2019.

The coalition government of the populist Five Star Movement (M5S) and the right-wing League party last week unveiled plans for a so-called "growth decree".

It will allocate €1.9 billion over three years to measures aimed at stimulating the economy, which focus mainly on companies.

The government was forced to water down its ambitious and costly budget in December to avoid being punished by the European Commission and the financial markets.

The dispute with Brussels over the budget ended before Christmas but pushed up borrowing costs and damaged confidence in the economy.

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