ROME: Italy will be stuck in recession for most of 2012 and stabilise only at year-end, missing the government's fiscal deficit and debt targets by a wide margin for this year and next, a Reuters poll showed on Thursday.
The findings point to a sharply deteriorating outlook for the euro zone's third largest economy, leaving Italy in its customary position over the last decade as one of the world's most sluggish economies.
The consensus among around 20 analysts polled over the past week points to a 1.2 percent contraction this year, followed by just 0.2 percent growth in 2013. That comes on the heels of an expected paltry 0.4 percent expansion in 2011.
The 2012 forecast is significantly worse than the poll taken three months ago, which was predicting a flat-lining economy for this year. But it is roughly in line with the Bank of Italy's own prediction of a 1.2-1.5 percent contraction.
By contrast, Prime Minister Mario Monti's technocrat government, which is now preparing liberalisation and labour reform measures, expects the economy to contract by a much more modest 0.4 percent this year and grow by 0.3 percent in 2013.
"Recent poor economic data and the intense financial contagion hitting Italy from the euro zone debt crisis point to a relatively prolonged and painful recession in Italy," said Raj Badiani from IHS Global Insight.
Italy has been at the centre of the euro zone debt crisis since the middle of last year, when market traders forced its borrowing costs dramatically higher. Since then it has relied on European Central Bank purchases of its government bonds to prevent yields from spiralling further.
Parliament approved a package of spending cuts and tax hikes at the end of last year worth more than 30 billion euros, aimed at reducing the deficit. But those measures in turn are likely to hit growth, which will crimp tax revenues.
According to the Reuters poll, gross domestic product (GDP) is now seen contracting in the first three quarters of 2012, staying flat in the fourth quarter and growing by only 0.1 percent in the first two quarters of 2013.
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