They see Italy’s economy contracting 1.8% this year with debt about 120% of GDP until 2018.
Comments from Fitch:
- In 2013, the primary surplus is estimated by the government to be 2.4% of GDP and the structural deficit 0.4%, not far from the balanced budget required by the medium term objective.
- Gross general government debt (GGGD) is expected to peak at 133% of GDP in 2014
- The recession that started in Q311 will likely end in H213 following a cumulative contraction exceeding 4%. GDP is 8% below its 2007 peak
Risks:
- A new bout of political turmoil resulting in paralyzed economic and fiscal policies, failure to comply with the constitutional and EU requirement of a balanced budget.
- A deeper and longer recession would likely undermine the fiscal consolidation efforts and increase contingent risks from the financial sector, and could also weaken the political support for the consolidation path.
