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Italy: improvements on all fronts but persistent structural challenges remain

Italy: improvements on all fronts but persistent structural challenges remain

Authors
Clément Monteil - Research Analyst
Insight

PDF 186.3KB

09 November 2017

Accelerating economy, progress in the banking sector and reduced political risk… but structural reforms are still needed.

Italy is subject to the same four issues present in many Eurozone member states, but with greater intensity: low growth (with productivity gains gone AWOL before the Global Financial Crisis), high public debt, a weak banking sector and political fragility. Improvements on all four fronts have characterized 2017: GDP growth accelerated to +1.5%, public debt remained sustainable despite (reasonable) stress, non-performing loans (NPLs) have peaked and progress was made to tackle the weakness of the Italian banking system. In addition, recent reform in the electoral law supports our view of reduced political risk for 2018. Nevertheless, Italy needs reforms to address its structural problems.

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