ROME, May 15 (Xinhua) -- Italy's economy will likely shrink slightly this year due to the country's struggling banking sector and divided politics, international ratings agency Standard & Poor's (S&P) said Monday.
The Italian economy "showed the strongest expansion since 2010, at 1 percent in 2016" but its gross domestic product (GDP) will likely achieve less than 1 percent growth in 2017 and will only grow by 1 percent in 2018, the ratings agency said in its "European Economic Snapshots" report.
Italian banks are still burdened by too many non-performing loans (NPLs), S&P analysts said.
"Due to its high public-sector debt and low growth momentum, Italy is particularly sensitive to an interest rate shock," the agency added.
Italy's government debt equaled 132.6 percent of the country's economic output last year, according to Italian official statistics bureau, Istat.
S&P also cited political gridlock in the coalition government led by center-left Prime Minister Paolo Gentiloni, difficulty in implementing reforms, and depressed household purchasing power due to slow wage growth and high unemployment.
The jobless rate stood at 11.7 percent in March, compared with 9.5 percent unemployment in the eurozone, Istat said.
Italy's long-term economic stagnation results from its low labor productivity and investment growth, according to the ratings agency.
Earlier this month, S&P affirmed a BBB-/A-3 rating on Italy's sovereign debt with a stable outlook.
The ratings agency said in its report out May 5 that it expects Italy's economy to grow by 0.9 percent this year, firming to 1-1.2 percent in 2018-2020.
Italian public debt "will remain broadly stable" at about 131 percent of GDP, according to S&P analysts.
In April, another major global ratings agency Fitch also downgraded its rating on Italy's long-term debt, citing the country's divided politics, high debt, and banking woes.
Fitch cut the country's rating from BBB+ to BBB, with a stable outlook.