Confindustria Forecasts Italian Economy To Flatline in 2008

Confindustria, the Italian employers association, are forecasting that the Italian economy will effectively stall this year as surging food and energy prices coupled with a strong euro takes its toll on consumer spending, manufacturing, and exports . They forecast the Italian economy will grow 0.1 percent this year, the slowest since 2003. That is more pessimistic than the government's prediction of 0.5 percent, which matched the European Commission's April forecast. The economy expanded 1.5 percent last year. It is very hard to say what the final 2008 GDP number will be at this point, but it seems clear that it is going to struggle to stay in positive territory.

Even more importantly they are suggesting that the slowdown growth will strain Italy's public finances. They forecast Italy's budget deficit in 2008 will rise to 2.5 percent of gross domestic product compared with its previous forecast in December of 2.2 percent. This is really the number of all numbers to watch, since Italy really needs to avoid a deficit of over 3% if it wants to stay out of trouble with the debt ratings agencies. The business group predicts the deficit will increase to 2.6 percent in 2009, casting doubt on the government's ability to balance the budget by 2011 as required by EU agreements.