Fabio Panetta, head of the Bank of Italy’s research department’s economic and monetary analysis division, feels that the risk of a period of deflation in the euro zone is increasing.
Regarding Italian growth, Mr Panetta thinks the country’s outlook is deteriorating and this will be reflected in the bank’s next forecasts which will be revised lower. The bank’s most recent forecast in January called for a GDP fall of 2.0% in 2009. Earlier this month BOI board member Ignazio Visco said that worse than expected data at the end of last year meant the 2009 contraction would now be at least 2.6%.
