BMI View: The second half of 2017 looks to be an improvement compared to the first half of the year, as signs of a stronger consumer outlook are showing green shoots. This includes an improved labour market, retail sales turning positive and an uptick in economic growth. While this improvement is welcome news, the improvement may be short lived, as still low GDP growth, falling real wages and ongoing political uncertainty put a ceiling on consumer confidence and spending.
The Italian economy is benefitting from a general upswing in regional and global economic activity, and we have revised up our 2017 real GDP growth forecast from 0.9% to 1.1% due to a better short-term outlook for industry and exports. While economic conditions will remain supported by a brighter export outlook, an improving labour market, and stronger risk, potential growth will be weighed down by tight credit conditions, a stalled structural reform drive, and domestic political and economic uncertainty. We forecast private consumption to come in at 1.3% in 2017, down from 1.4% in 2016, while real GDP per capita will not rise to pre-crisis levels over our ten-year forecast period to 2027.