5 April 2001, 15:19 ITALY GOVT CUTS 2001 GDP FCAST TO 2.5%; UPS CPI, DEFICIT
By Gavin Jones
ROME (MktNews) - The Italian government has lowered its official
2001 real GDP growth forecast to 2.5% from 2.9%, while revising up its
inflation projection -- based on the main domestic index (NIC) -- to
2.3% from 1.7%, and lifting its target for the public deficit-to-GDP
ratio to 1.0% from 0.8%.
The revisions are contained in the summary of a forecasting
document, the so-called 'first quarter cash report,' which was issued by
the Treasury late Wednesday. The Treasury generally releases what it
considers to be unwelcome news late in the evening.
Treasury Minister Vincenzo Visco had already said that the
government's previous forecasts, as set out in its stability program
sent to Brussels at the start of this year, would be have to revised,
and the new deficit and inflation projections broadly confirm his
indications regarding the extent of the revisions.
The new 2001 growth forecast of 2.5%, however, is below the
2.6-2.7% figure which newspapers had anticipated on the basis of Visco's
comments. He had spoken of a "slight" revision, and until recently had
argued that the projections of Italian growth around 2.4% or 2.5% by
some international organizations were "too pessimistic."
While GDP growth in the fourth quarter of last year came in
stronger than expected, it was strongly export led, suggesting it may be
vulnerable to the slowdown in world demand.
This year, industrial output in January posted a sharp
month-on-month fall and forward indicators point to another clear drop
in February, while February's business confidence index released on
Tuesday showed the steepest monthly drop since January 1996.
The government's new growth forecast is broadly in line, or just a
shade above the market consensus, while the inflation forecast and the
deficit target will still be considered too optimistic.
The market consensus for 2001 inflation (NIC) stands at 2.5%, the
same result as last year. Preliminary data for March pointed to a 2.8%
year-on-year rate.
It will be noted that the government's new 2.3% projection is
significantly above the ECB's reference ceiling for price stability in
the eurozone.
Public deficit data came in worse than expected for each of the
first three months of this year. Several prominent think-tanks have
forecast a 1.3% deficit-to-GDP ratio, which was also the median
projection in Market News International's most recent monthly survey of
analysts.
Among other revisions in the document, the Treasury marginally
lowered its target for the 2001 primary surplus to 5.2% from 5.3% in its
stability program and, on the positive front, lowered its debt-to-GDP
target to 106.2% from 106.6%, after last year's ratio came in
significantly below expected at 110.2%
The summary of the Treasury's document is published on its web-site
(www.tesoro.it).
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