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Italy 'facing 20 years of economic woe' 'Two lost decades' for Italy's economy
(35 minutes later)
The IMF has warned that Italy faces two decades of stagnant economic growth. Italy's economy will not return to the levels seen before the 2008 financial crisis until the mid-2020s, the IMF has said, implying "two lost decades".
Its latest report on the country puts growth this year at under 1%, down from its previous 1.1% estimate, and forecasts growth in 2017 of about 1% - down from a 1.25% estimate. By the mid-2020s, it says the economies of other eurozone members will be 20-25% larger than levels seen in 2008.
The IMF says Italy will not reach pre-crisis levels until 2025, by which time its neighbours will have economies 20-25% above 2008 levels. The Fund's comments came as it cut its growth forecasts for the eurozone's third largest economy.
Italy is the third largest eurozone country. It now expects Italy's economy to grow by less than 1% this year, compared with an earlier estimate of 1.1%.
It has 11% unemployment and a banking sector in crisis, with government debt second only to that of Greece. The IMF also cut its growth forecast for 2017 to about 1% from 1.25%.
The country's banks are under pressure because the long-standing poor economic performance has depressed tax revenue and increased the chances of businesses getting into difficulty and being unable to maintain their loan payments. Italy has an unemployment rate of 11% and a banking sector in crisis, with government debt second only to that of Greece.
Italian banks are weighed down by massive bad debts, and may need a significant injection of funds.Italian banks are weighed down by massive bad debts, and may need a significant injection of funds.
'Surge' The IMF said any recovery in the Italian economy was likely to be "fragile and prolonged", adding that the authorities faced a "monumental challenge".
The IMF says any recovery is likely to be prolonged and subject to risks. "The recovery needs to be strengthened to reduce high unemployment faster and buffers need to be built, including by repairing strained bank balance sheets and decisively lowering the very high public debt."
Among those risks are the UK's withdrawal from the European Union, which it said last week had prompted it to downgrade its forecasts for growth for the entire eurozone. Last week, the IMF cuts its growth forecast for the eurozone as a whole because of the expected impact of the UK voting to leave the EU.
Other problem areas include "the refugee surge, and headwinds from the slowdown in global trade". It now expects the eurozone's economy to grow by 1.6% this year and 1.4% in 2017. Before the referendum the IMF had predicted growth of 1.7% for both years.
The IMF said last week that the eurozone was expected to grow by 1.6% this year and 1.4% in 2017. Before the referendum the IMF had predicted growth of 1.7% for both years.
The IMF also revised down its 2018 growth forecast to 1.6% from 1.7%.