Italy's economy to shrink by 1 per cent in 2013, central bank says

Rome (dpa) - Italy‘s gross domestic product (GDP) will contract by 1 per cent this year, the country‘s central bank said Friday, revising downward its previous estimates, even as the poor state of the economy dominates the campaign for next month‘s elections.

In July, gross domestic product (GDP) had been forecast to contract only by 0.2 per cent.

The figures for 2013 are worse "as a consequence of the worsening international context and the persistent sluggishness of activity in recent months," the bank‘s latest Economic Bulletin said.

Unemployment was projected to peak at 12 per cent in 2014, from around 11 per cent. The youth jobless rate is causing particular concern: in November it hit a record 37.1 per cent.

Quarterly growth could return "in the second half of the year, albeit at a slow pace and subject to very considerable uncertainty," the Bank of Italy said.

Annual growth was expected to return only in 2014, with a modest 0.7-per-cent expansion. By then, Italy‘s output will still be 7 per cent below its 2007 peak.

Also, the Bank of Italy broadly confirmed its GDP estimate for 2012, saying it expected it to have shrunk by 2.1 per cent.

Italy‘s GDP has been falling since the fourth quarter of 2011 - causing one of the deepest recessions in its modern history. Figures for the fourth quarter of 2012 are due on February 14, and are expected to be negative again.

Outgoing prime minister Mario Monti is accused by his conservative predecessor, Silvio Berlusconi, of having depressed the economy with excessive rounds of austerity, in an alleged act of subservience to a German-dominated European Union.

In a video message, Monti defended his record, saying he "saved" Italy "from a financial crisis that threatened to destroy it. I had to ask many sacrifices to citizens, and together we managed to emerge from this crisis," he said.

The third major contender in the February 24-25 vote, the front running centre-left, has pledged to continue on Monti‘s austerity path, while striving to mitigate its harsher effects and reduce inequalities. dpa alv ncs Author: Alvise Armellini