US business and financial services powerhouse Moody’s announced it has cut its 2019 growth forecast for Italy to 0.5 percent or lower, assuming growth over the next handful of years to be under one percent. Kathrin Muehlbronner, Moody’s lead analyst for Italy, said: “We had estimated Italian GDP growth of 1.3 percent. “This year it will certainly be under one percent, probably a value between zero and 0.5 percent.” She added: “We have a stable outlook, covering a period of 12 to 18 months, and we don’t see changes. We have assumed low growth for a few years at most, under one percent.”
She also said she predicts “a significant risk of early elections probably after the European elections. Hard to say what the government will be”.
Ms Muehlbronner added: “The situation is unclear and the political risk is difficult to assess. There may be a need for a new coalition with further political uncertainty.”
Directorate-General of the European Commission Eurostat confirmed the Italian GDP is in the last place in the EU with a -0.2 percent in the fourth quarter of 2018.
This means that even on an annual basis, Italy is the country that grows the less with a 0.1 percent figure.
The outlook could see the member state follow Spain’s announcement of an emergency election.
The country called a snap general election today, which is due to take place on April 28 after socialist Prime Minister Pedro Sanchez’s budget laid bare the opposition’s inability to pass key legislation.
His failed attempt to pass a budget for this financial year came amid a parliament rejection after talks to get Catalan pro-independence parties on board broke down.
Mr Sanchez told Bloomberg: “I’m convinced – convinced – that it’s possible to resume effective policies.”
He added that Spain “doesn’t have one minute to waste”.
The news further picked Spain into renewed uncertainty.
Mr Sanchez became the country’s leader last summer after winning a no-confidence vote against former leader Mariano Rajoy thanks to the help of Catalan separatist parties.
After a 10-month standoff, Mr Sanchez finally came into power.
But now, with just 84 ministers in the 350-strong parliament, passing legislation has proven to be all the more challenging for him.
Additional reporting by Maria Ortega.