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ECONOMY

Italy’s GDP shrinks for eighth straight quarter

The Italian economy shrank by less than feared in the second quarter of 2013, boosting hopes that the end of recession is in sight, but marked the eighth quarterly contraction in a row.

Published: 6 August 2013 11:35 CEST
Italy's GDP shrinks for eighth straight quarter
Photo: Rosie Scammell/The Local

The official Istat data agency said that the economy shrank by 0.2 percent in the quarter, amid recent indicators that the recession is easing.

Economists polled by Dow Jones Newswires had forecast a 0.4-percent quarterly drop.

The latest shrinkage follows a 0.6-contraction in the first three months. 

"In the third and fourth quarters we may at last see the GDP slip into the positive and be able finally to say the recession is over," Italy's Minister of Labour Enrico Giovannini said in a radio interview on Tuesday.

The International Monetary Fund and the Bank of Italy have respectively forecast a 1.8 percent and 1.9 percent contraction of the economy in 2013, following a shrinkage of 2.4 percent in 2012.

Gross domestic product (GDP) shrank by 2.0 percent compared to output 12 months earlier and "acquired growth" was down 1.7 percent, Istat said.

Christian Schulz, Berenberg senior economist, said the 0.2 percent second quarter decline was "the mildest contraction since the start of the recession" in the third quarter of 2011.

"Italy is still likely to be the worst performing large European economy for a third successive quarter …but the worst of the crisis is over and Italian GDP should be growing again before the end of the year, backed by fading austerity and an export-driven recovery," he said.

In data supporting hopes hopes for an economic reprieve, the agency said industrial output in the country increased in June, with production up 0.3 percent compared to May.

Giovannini said there was "increasing optimism among families, greater confidence among businessmen and more orders on the domestic market. The desire to overcome the recession is becoming ever more concrete."

Despite the good news, the economy remains at risks from the volatile political situation following former premier Silvio Berlusconi's definitive conviction for tax fraud.

The furious reaction from Berlusconi and his People of Freedom party (PDL) following Thursday's supreme court ruling has raised concerns for the stability of Prime Minister Enrico Letta's grand coalition government and the country's economic recovery.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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