Milan

Economic outlook to remain weak in 2013 warns bank report

Interest rate spread with German bonds likely to narrow

Economic outlook to remain weak in 2013 warns bank report

Milan, December 27 - The Italian economy is facing another tough year in 2013, with the current recession lingering, warns a new economic study released Thursday. The country's gross domestic product won't do quite as badly next year as this year, but GDP will slide by about 1% in 2013 compared with an average loss of 2.1% in 2012, says Intesa Sanpaolo. The bank's research department, in a report on the macroeconomic outlook, says the spread with German bonds will average 100 basis points lower next year than the average in 2012. That's good news for the national treasury and other important borrowers. The study says that the spread between Italy's 10-year bond and its German counterpart will average 280 basis points next year - a significant decrease compared with the 395 midpoint estimated for 2012. The spread should significantly decline in the second half of 2013, although it may remain quite high in the next six months, the bank warns. And it warns that real economic growth might not be seen for another three years. "In our scenario, only in 2016 will GDP return to levels seen before the last recession (which began in 2011), and it will take many years to recover the pre-crisis highs," of growth before 2007, said the report. "This will have important implications with regards to the size of the (domestic) production system and employment," in Italy.

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