Country Economic Forecasts - Italy
GDP expanded by 0.2% in Q2, a touch lower than in Q1. Investment contributed to growth but net trade was a drag on activity for a second consecutive quarter. We expect exports to pick up in Q3 and for net trade to make a positive contribution, with quarterly GDP growth averaging close to 0.3% in Q3 and Q4. However, this sort of pace will only be sufficient to generate annual GDP growth of 1.1% in 2019, after 1.2% this year. Markets await the first budget from the Lega and Five Star government, anxious to see how much the budget deficit may widen. Our view remains that a conservative approach will prevail, with a targeted deficit of around 2% of GDP in 2019, but uncertainty remains high.