‘Italy economy shrinks by 0.5% in Q1’

Italy’s economy has shrunk by 0.5 percent in the first quarter of 2013 in a greater slowdown than expected.

Official figures released by Italy™s National Statistics Institute (ISTAT) on Wednesday said that experts had forecast a 0.3 percent contraction compared to the fourth quarter of 2012.

Italy’s gross domestic product (GDP) was reported down 2.3 percent from a year earlier, ISTAT added.

Earlier this month, the statistics agency said the eurozone’s third largest economy would shrink by 1.4 percent this year and grow by 0.7 percent next year.

The country is still grappling with an 11-percent unemployment rate which is set to rise to a record high of 12.3 percent in 2014, according to ISTAT.

However, Italy’s economy did not decline as sharply as it did in the final three months of 2012, when it shrank 0.9% from the previous quarter.

Italy’s sovereign borrowing costs softened considerably during the period, but bank lending remained very weak, reflecting funding strains on banks as well as a backdrop of low domestic demand and rising unemployment.

Government forecasts point to the Italian economy beginning to expand, modestly, in the third quarter, but other institutions have bleaker forecasts for the full year.

The government plans to announce on Friday details of how it plans to enact a pledge to suspend a property tax and a planned sales-tax hike, both of which should bolster domestic income.

Italy started to experience recession after its economy contracted by 0.2 percent in the third quarter of 2011, and by 0.7 percent in the fourth quarter of the same year.

EKA/KA