Political uncertainty remains Italy’s main risk for 2013, Intesa Sanpaolo
The year that has just started will be another very difficult one for the Italian economy, according to domestic bank Intesa Sanpaolo.
Economists at the bank estimate that GDP will contract by 1% in 2013 and domestic
demand will suffer the most, while foreign trade will continue to represent the sole source of growth.
“In our central scenario, return to modest growth on a quarterly basis will only materialise in the second half of the year. Risks to the scenario are still skewed to the downside, with political uncertainty at the fore,” Intesa said.
The recessive factors faced in 2012 will continue to have an impact in 2013, even if they will start to ease their grip on the economy.
The effects of the debt crisis, in particular on financial conditions and confidence, will continue to weigh in 2013. “However, in this case as well, we believe the effects will be weaker than in 2012. Indeed, the “temperature” of the crisis, the 10Y BTPBund yield spread, should narrow from the 2012 estimated average of 395bps,” Intesa said.
The main internal risk remains political uncertainty. “Uncertainty over the outcome of the elections could weigh on financial conditions at least until the date of the polls, and much will then depend on the possibility of forming a stable government, committed not only to following in Mr. Monti’s steps in terms of budget discipline and reform, but also to increasing actions in support of growth,” the bank said.
The formation of a stable government would have the effect of significantly easing tensions on the markets, which seem to have Italy as their main point of origin following announcement of Mr. Monti’s resignation.