Economic Bulletin No. 4 - October 2016

Global growth remains modest

Although the result of the UK referendum held in June has had no significant repercussions to date on conditions in the international financial markets, the world economy nonetheless continues to expand at a moderate pace. Growth expectations for international trade have been revised downwards again: there are risks stemming from the geopolitical tensions stoked by the conflicts in the Middle East, the threat of terrorism, and fears that political developments in many of the advanced economies could lead to forms of isolationism.

In Italy the recovery continues at a modest pace

After stagnating in the second quarter, output appeared to return to moderate growth in the third. Employment continued to rise at a faster pace than GDP, despite the reduction in social security contribution relief compared with last year. Investment is struggling to pick up; it has grown at a modest pace compared with other euro-area countries and with what was the norm following previous recessions. Access to credit is no longer holding back investment: bank lending conditions are relaxed and loan quality is improving. Investment is being affected above all by the weak outlook for demand.

This fiscal policy stance is expected to remain expansionary in 2017

In the Update of the 2016 Economic and Financial Document, the Government confirmed its fiscal policy stance for the three years 2017-19 as outlined in April. The effects of the Government’s intended measures will depend on what interventions are taken and how they are implemented; this will be specified in more detail in the budget law. In order to support growth, attention should be focused on measures to foster private and public investment, ensuring for the latter prompt utilization of resources; funding should be sourced above all from interventions to limit general government running costs.