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Italy lone G7 member still in recession, OECD says

03/09/2013

But recovery around the corner

Italy lone G7 member still in recession, OECD says

(By Sandra Cordon). Paris, September 3 - Although the weary and battered Italian economy will continue to stumble through this rest of this year, it will likely find its footing and show some strength in 2014, a major international economy body said Tuesday. Gross domestic product (GDP) will fall by an estimated 1.8% this year in Italy, which will likely be the only member of the G7 world-leading economies to contract in 2013, said the Organization for Economic Cooperation and Development (OECD). Overall, after more than two years of fighting a sovereign debt crisis, the weary eurozone remains vulnerable to financial, banking and debt concerns and must find ways to improve competitiveness, the Paris-based agency added. Still, other major European nations are showing signs of economic improvement, leading the OECD to raise its growth forecasts for Germany, France and the United Kingdom. Although 2013 won't be Italy's year, the agency suggested there was cause for hope, with signs of economic strength in 2014. Economic contraction will slow to 0.4% and 0.3% respectively in the final two quarters of 2013 but after hitting bottom, economic growth should resume next year. "The indicators suggest that Italy is slowly but surely coming out from the recession into which it had fallen," said Jorgen Elmeskov, deputy chief economist with the OECD. But economic growth is not guaranteed, the agency warned. Political risks and uncertainty in Italy could still choke off the green shoots of economic growth now appearing. Consumers are also suffering deeply while employment is stagnant and that will hurt growth, warned Italian consumer groups, which in a statement Tuesday called the OECD forecasts for 2014 "premature". In presenting his report in Paris, Elmeskov acknowledged that around the globe, the emerging signs of recovery could still be choked off. "The gradual pick-up in momentum in the advanced economies is encouraging, but a sustainable recovery is not yet firmly established," he said. "Major risks remain," including stress in financial markets and the banking system. Around the globe, "continued support for demand is still needed to make sure recovery takes hold, and it remains vital that this be complemented by structural reforms to boost growth, rebalance the global economy and avoid a ratcheting-up of structural unemployment," said the economist. And with an average 12% rate of unemployment in the eurozone, tackling joblessness "is crucial".