Economic Bulletin No. 4 - 2018

Risks to the global economy increase

Growth remains solid in the main advanced economies, though world trade has slowed significantly and financial and currency tensions have surfaced in the most vulnerable emerging countries. Global risks have increased, stemming from the possible repercussions of protectionist measures on corporate investment and from the potential increase of financial tensions in the emerging economies.

The ECB Governing Council has reduced asset purchases, but will maintain an ample degree of monetary accommodation as long as necessary

Economic activity in the euro area continues to expand, though more slowly. Inflation has remained at around 2.0 per cent, but core inflation is struggling to gain ground. The ECB's Governing Council reduced its net asset purchases in October and confirmed its intention to cease them at the end of 2018; it also reasserted the need to maintain an ample degree of monetary accommodation as long as necessary.

Growth continues in Italy, but appears to slow in the third quarter

In Italy, the marked expansion in investment helped to sustain growth in the second quarter, while exports remained stable owing to weak global trade. The available cyclical indicators suggest that in the third quarter GDP growth slowed to about 0.1 per cent compared with the previous quarter.

Non-performing loans continue to diminish, but the Italian financial markets have been affected by tensions

Credit quality has improved steadily; the earnings and capital conditions of banks have improved significantly. However, both share prices and risk premiums on bank bonds have been affected by strong tensions in the Italian financial markets as a result of investors' uncertainty about the economic policy stance.