Risks for the world economy persist
The risks for the world economic outlook, which stem from the prolonged international trade tensions and from the slowdown of economic activity in China, have not subsided. Long-term yields have declined in the advanced countries, affected by the poorer growth prospects and by the more accommodative stance of the main central banks.
The ECB extends monetary expansion
Economic activity in the euro area remains weak and prone to downward risks, and inflation is still at low levels. The ECB Governing Council has extended the time horizon over which it expects to keep interest rates low and has set out the details of a new series of refinancing operations (TLTRO III). It announced that, if the situation does not improve, further monetary accommodation will be needed, and discussed the options that could be used.
In Italy, economic activity stagnates
In the second quarter, economic activity in Italy may have remained unchanged or decreased slightly; it was affected by the weak industrial cycle, common to Germany too, caused by persisting trade tensions. The Bank of Italy's surveys show that firms expect a slowdown in demand over the next few months and indicate a very modest growth in planned investment for the current year.
Risk premiums decline
The adjustment of the deficit for this year and the resulting decision of the European Commission not to recommend the launch of an excessive deficit procedure against Italy have contributed to the fall in the yield spread between Italian and German government bonds, at a time of a generalized decline in risks premiums due to the prospect of monetary accommodation.
The projections point to a slowdown in GDP this year
This Bulletin presents the macroeconomic projections for the Italian economy for the three years 2019-21, which update those prepared as part of the Eurosystem's forecasting exercise. The central projection for GDP growth is for 0.1 per cent this year, 0.8 per cent next year and 1.0 per cent in 2021. The risks for growth stem from continued tensions over trade policies and, in Italy, from a heightened uncertainty over the fiscal policy stance from next year onwards; vice versa, the introduction of a virtuous circle between fiscal policy and financial conditions could boost economic activity.
