Recovery has started in Italy earlier than expected

According to preliminary figures provided by the Bank of Italy, Italian GDP grew by a surprising 2.4% in Q3 of 2009 compared to the previous quarter, signalling the beginning of a recovery that was not previously expected to start until the first quarter 2010.

Industrial production is recovering slightly in line with the improvement in international trade. Italy has profited from the recovery in Germany and France and the continuing strong growth in China. Italian banks are still seeing a deterioration in their assets. In June 2009, Italian bad debts reached 52 billion (3% of total assets), 12 billion more than in November 2008. Bad debts constitute 4% of total assets for industrial companies and 6% for households (up 27% year-on-year). The steepest rises have been in transport (up from 3.0% to 5.7%), textiles (from 7.6% to 9.9%) and electric equipment (from 5.3% to 7.2%)

Crédito y Caución expect that, in the coming months, the economy will experience a period of moderate recovery. At the moment, forecasters predict Italian growth of 1% next year, and industrial output is expected to grow by 7.4% in 2010, compared to a 13.5% decrease in 2009. But there is still concern about what will happen to the economy once the fiscal stimulus incentives have expired. Prices and the cost of capital are expected to grow, putting pressure on public debt service and requiring tighter fiscal control. This may also affect Italian households, whose debt has grown to 60% of available income from 30% in 2000.