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News Analysis: Italy's recovery "at hand", paves way for crucial reforms: analyst

English.news.cn   2014-01-04 08:13:24            

by Alessandra Cardone

ROME, Jan. 3 (Xinhua) -- Italy's recovery is within reach and its economy will return gradually to grow in 2014, on condition that the country carries out crucial reforms, a UniCredit analyst said.

"Technically Italy is now out of recession and it may as well be getting out of the crisis in 2014, provided the cabinet resumes the path of reforms," UniCredit Research economist Loredana Federico told Xinhua.

In an overall outlook over key factors concerning Italy's performance in 2014, the analyst indicated foreign demand as the driving force behind recovery.

"Despite the crisis, a speedup in foreign demand has positively affected Italian exports since the last months of 2013, and we expect this trend to be confirmed during 2014," she explained.

According to the National Institute of Statistics (ISTAT), Italian exports' trend grew 1.2 percent between January and November 2013 (in a 12-month comparison) and trade surplus reached 16.6 billion euros (about 22.7 billion U.S. dollars).

High-value brands and fine craftsmanship kept their "allure" during the crisis: as the Trade Performance Index of UNCTAD (United Nations Conference on Trade and Development) stated, Italy has remained the top ranking exporter in the world for textiles, clothing and leather goods and second, after Germany, for manufacturing and non-electronic machinery.

This explains why foreign demand is seen as crucial. "Upon this, most of all, depend Italy's chances of growth in 2014," the UniCredit Research expert confirmed.

After its longest post-war recession, Italy's gross domestic product (GDP) stopped contracting in the third quarter of 2013. Economy Minister Fabrizio Saccomanni commented on the improving figures by saying that "recession is over and Italy is at a turning point in the business cycle."

The outlook of UniCredit bank, Italy's largest banking group by assets, appears also quite positive.

After more than a decade without growth, however, much and more seems to depend upon the country's capability to fulfil expectations of a major overhaul.

"We agree on the notion that recovery and growth are 'at hand', but they will require a strong program of institutional and economic reforms on the ground," the UniCredit Research analyst told Xinhua.

Italy has experienced painful spending cuts and some reforms under Mario Monti's cabinet (Nov. 2011-May 2013), in order to keep its public finances under control and improve competitiveness.

A left-right coalition government came after that, and despite Prime Minister Enrico Letta's commitment to implementing more substantial changes, political instability has dominated the scene and reforms seemed to have been put "on hold".

Italy has showed gradual signals of improvement since the last quarter of 2013, and the Bank of Italy and the International Monetary Fund (IMF) have forecasted a 1.0 percent GDP growth in 2014.

Yet, some figures remain daunting and the recovery fragile. The reforms' agenda should therefore be put back on track in the new year, the analyst suggested, to avoid the risk of losing the potential of growth.

A modest increase of investments is possible in the coming months, though not certain, according to the economist.

"Investments may rise during 2014, provided that exports trend keeps going well. Strong exports entail more orders for Italian companies and that could give businesses more confidence and drive them to improve their investments," Federico explained.

Regarding households, the outlook is also of a gradual improvement. The crisis still weighs on many Italians, but ISTAT data showed that household savings rates have gradually started to increase again since the first trimester of 2013. This would suggest families are facing a less urgent need to draw heavily on their assets to resist the crisis.

Yet families would remain cautious in their spending attitude throughout 2014, according to Federico.

"They would prefer consolidating their savings again, and job market uncertainty will still burden them," the analyst concluded. An increase in private consumption, therefore, is seen as less likely.

Editor: Luan
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