The Italian Treasury's chief economist expects economic growth to speed up in the second quarter after a first quarter slowdown while industrial output should rebound in May, he said on Thursday.
"I expect GDP to be firm in the second quarter, good compared with the first," Lorenzo Codogno told reporters. "Italy will continue to grow faster than its potential rate. There will probably be a rebound in industrial output (in May)." Asked if this would mean changes to growth forecasts in an economic plan to be presented by the end of this month, Codogno replied: "I don't think there will be big changes to the macroeconomic forecasts for this year and next."
Italian gross domestic product grew 0.3 percent in the first quarter compared to the 1.1 percent jump in the last quarter of 2006, while output fell 0.8 percent month-on-month in April, the third drop in four months.
Romano Prodi's centre-left government currently forecasts growth of 2 percent this year and 1.7 percent in 2008. The government will present an outline of its 2008 budget and update its growth and public finance forecasts for the next four or five years in an annual rolling plan known as the DPEF. Prodi has said he expects the plan to be issued on June 28.
Despite some recent patchy data, "the strength of Italy's recovery has lots of momentum," Codogno said, partly thanks to "an excellent climate at the European level." Although growth slowed sharply between January and March, the components of GDP were quite positive, he said, with a recovery in consumer spending and a sharp inventory contraction which should be reversed in the second quarter.
Economy Minister Tommaso Padoa-Schioppa is preparing the DPEF amid calls for expansionary policies by ruling parties who are worried about the government's loss of popularity and defeats in recent local elections.
Padoa-Schioppa insists Italy must hold firm to its commitment to cut the budget deficit, which has exceeded European Union limits for the last four years. On Thursday he said he welcomed a call by the European Commission for Italy to use any higher-than-expected tax revenues this year to cut the deficit and took a swipe at the spending ambitions of the coalition parties. "There are so few who remember that the numbers have to add up that anyone who does so is welcome," he said in a television interview.
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