“GDP growth has stalled as domestic policy uncertainty and weaker external demand has dragged down investment, while private consumption growth has also lost momentum,” said Fitch. “Fitch forecasts GDP growth of 0.3% in 2019, down from 0.8% in 2018 (compared with the 1.2% we forecast for both years at our previous review in August), with investment growth falling to 0.4% from 3.8% last year.”
Troubled Italian bank stocks have been supported by analysts’ expectations that the European Central Bank will extend its Targeted Longer-Term Refinancing Operations, which provides cheap loans to banks, a large portion of which has gone to Italian lenders. Political volatility could rear its head again I Italy this year.
“Policy tensions in the coalition government and the potential for early elections add to uncertainty over fiscal and economic policy,” according to Fitch. “The large ideological differences between the Five Star Movement and Lega are likely to put an increasing strain on the coalition, and we consider Lega would be minded to trigger a new election and return to the previous agreement on the right with Forza Italia and Brothers of Italy if it calculates they would win a majority of seats.”
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