"The latest indicators are consistent with gradual improvement: the decline in output should come to a halt in the coming months. The downside risks to this scenario are compounded by investors' concern about possible political instability."
- Ignazio Visco, Governor of Bank of Italy
Following the last week's report that showed Europe's third largest economy contracted for the eighth consecutive quarter, suggesting Italy will be the only member of the G7 world-leading economy that is expected to contract this year, Italian government decided to downgrade its growth forecast. The economy is expected to shrink 1.7% this year compared with a previous estimate of a 1.3% drop. Regarding the next year, growth is seen at 1.0%, 0.4% lower than expected earlier. Moreover, the budget deficit will reach 3.1% of GDP this year, according to current trends, however, Economy Minister Fabrizio Saccomani stressed out it is vital to correct budget gap to meet the European Union's 3% ceiling.
In a separate report the national statistics institute Istat said industrial order plunged in July, due to a continuous weakness in domestic demand. The number of industrial orders dropped 0.7% in the middle of summer from June, when they fell 2.5%. On an unadjusted annual basis, the indicator turned lower 2.2%. As orders are a proxy for future sales, the recent figures are adding to concerns Italian companies will continue suffering in the upcoming months.
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