Italy Growth Seen At 1.5%

Italy's economy will emerge from last year's flat performance to show growth of about 1.5 % in 2006 thanks to improving exports, the International Monetary Fund said Feb. 7.

The outlook in the IMF annual review for Italy was slightly better than the 1.4% growth in the organization's World Economic Outlook published in September. "A consolidation of the cyclical recovery that began in mid-2005 is expected this year, with growth rising from close to zero last year to about 1%-1/2% in 2006," the report said.

"Net exports and investment should benefit from sustained demand in partner countries, while consumption growth is forecast to remain within the narrow range witnessed in recent years. Despite high international energy prices, inflationary pressures should remain modest, at just over 2% in 2006."

The IMF said that despite the better short-term outlook, "medium-term trends remain troubling" with growth expected in the 1.25% range "as low productivity growth and high domestic costs have led to a steady erosion of competitiveness and export market share."

The IMF said that "pervasive rigidities and inefficiencies in the domestic economy are restraining growth more generally," and that the large public debt "also remains a drag on the economy." As a result, the IMF urged Italy to "undertake significant fiscal consolidation over the medium term to reduce the high public debt and fiscal deficit, while widening and deepening structural reforms."

Copyright Agence France-Presse, 2006

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