by Gavin Jones and Giuseppe Fonte
ROME, Oct 31 (Reuters) – The Italian economy held up better than expected to the deterioration in the global economy in the third quarter, official statistics showed on Monday, a good surprise for the new government, which has promised to reduce the public debt and to help households and businesses deal with inflation.
Gross domestic product (GDP) increased by 0.5% in July-September compared to the previous three months and by 2.6% over one year, announced Istat, the national statistics institute.
The Reuters consensus was for quarter-on-quarter stagnation and the Treasury said last month it expected a contraction.
The good performance of activity in the services sector supported domestic demand, explained Istat, while industry declined and foreign trade weighed on the evolution of GDP.
As in most other European countries, Italy’s economic prospects are suffering from soaring energy prices exacerbated by the war in Ukraine, which is also undermining household morale and the business climate.
Speaking in public for the first time since taking office, new Economy Minister Giancarlo Giorgetti said on Monday that Giorgia Meloni’s government would reduce the budget deficit and public debt over the next few years, while promising to increase public debt in the shorter term.
Coming from the League, one of the parties in the right-wing coalition which won the legislative elections on September 25, Giancarlo Giorgetti, noted that France and Germany had already announced “large-scale measures” in support of their economy in the face of the energy crisis and inflation, adding that Italy should not be afraid to follow suit.
“We are deeply convinced of the need to protect families, especially the weakest, from rising energy bills and the cost of living,” he said at a colloquium on the banking sector in Rome.
The government plans to widen the budget deficit next year to 4.5% of GDP from 3.4% forecast last month, a senior official said. This would give it additional leeway of around 21 billion euros to finance demand support measures.
While Italian growth beat expectations in each of the first three quarters of the year, UniCredit economist Loredana Federico pointed out that the bank was still pricing in a recession and forecasting a 0.5% decline in GDP. in the fourth quarter, with Italy being “particularly vulnerable to the energy crisis in Europe”.
Inflation in the peninsula reached 12.8% year on year in October, its highest level since the establishment of the harmonized calculation rules at European level (HICP).
Loredana Federico said summer tourism may have boosted growth between July and September. Tourism accounts for around 13% of Italian GDP. (French version Marc Angrand)