Exports and investment to spur Italy’s growth

After contracting again in 2014, Italy’s economy will grow by 0.6 percent this year – slightly better than previously forecast – and will rise to 1.4 percent in 2016, the EC said on Tuesday.

Exports will be the main driver of the growth, aided by a weaker euro, with the pace of growth picking up in 2016 as Italy benefits from increasing external demand and investment.

The unemployment rate – which stood at 12.7 percent in February – is forecast to marginally decline in 2015 and stabilize in 2016.

Meanwhile, the pressure on labour costs will subside thanks to tax cuts included in Italy’s 2015 budget, while labour productivity is tipped to improve.

Reforms brought in by premier Matteo Renzi since he came to power, such as the so-called Jobs Acts, are also appealing to foreign investors.

Italy ranked 12th in the 2015 foreign direct investment confidence index by AT Kearney, the management consultancy firm, rising from 20th place last year.

“In the face of a mounting unemployment crisis, the government worked to pass controversial labor market reforms under the Jobs Act that ease firing restrictions and address Italy’s rigid labor market,” the report said.

Investors have also been buoyed by recent deals between foreign and Italian companies, such as the acquisition of the household appliance firm Indesit by the US-based Whirlpool last year, and the merger between Alitalia and Abu Dhabi’s Etihad, which helped save the flagship carrier from bankruptcy.