ROME: Italy's economy is expected to have contracted in the third quarter of the year as international tensions hit the outlook for exports and household and business confidence dimmed, the Bank of Italy said on Thursday. "According to the indicators available so far, GDP in the third quarter is likely to have fallen slightly," the central bank said in its latest economic bulletin for October.
"The outlook for external demand has become more uncertain, reflecting geopolitical tensions.
A recovery in household and business confidence, seen at the end of last year, stalled in the summer."
Italy's economic output, which has contracted some 9 percent since the start of the economic crisis in 2007, fell by 0.3 percent in the second quarter and a second consecutive quarter of contraction would put it into recession.
A revision of the first quarter data to show a flat reading rather than a 0.1 percent drop meant that in narrow, technical terms Italy avoided recession, normally defined as two consecutive quarters of negative growth. But the slump remains the most serious since the Great Depression of the 1930s.
The Bank of Italy said that given the duration and severity of Italy's economic crisis, the government's decision to delay debt-cutting targets in the 2015 budget appeared reasonable as long as the extra margin for manoeuvre were used to help restore medium- and long-term growth.
The central bank repeated that Italy faced a high risk of a prolonged period of low inflation, posing a risk to efforts to cut its public debt, the second highest in the euro zone in relation to gross domestic product.
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