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Recession in Italy not to end before mid-2020s, IMF warns

Tuesday, 12 July 2016 9:46 AM [ Last Update: Tuesday, 12 July 2016 10:20 AM ]

This picture taken on June 29, 2016 shows the Head Office of Monte dei Paschi di Siena Bank in Siena, Italy. ©AFP

The International Monetary Fund (IMF) has cut the growth forecasts for Italy’s economy after the UK’s vote to leave the EU, warning the country will not recover from the 2008 recession before mid-2020s.

Italy’s economy is now predicted to grow at “just under 1 percent in 2016 and at about 1 percent in 2017,” the IMF said, down from earlier estimates of 1.1 percent and 1.25 percent, respectively.

The IMF further said the eurozone’s third biggest economy will return to levels seen before 2008 global financial crisis only by around 2025.

However, the report expects that economies of other eurozone members states to increase by 20–25 percent above their pre-crisis levels in mid-2020s.

“The authorities thus face a monumental challenge. The recovery needs to be strengthened to reduce high unemployment faster and buffers need to be built, including by repairing strained bank balance sheets and decisively lowering the very high public debt,” the report said.

The US-based fund said the Brexit vote has increased downside risks for Italy.

In a referendum late June, about 52 percent of British voters opted to leave the EU, while roughly 48 percent of the people voted to stay in the union.

Italy has the highest public debt in the euro zone after Greece’s and also suffers from a troubled banking sector and an unemployment rate of 11%.

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