Italy's economy performs well but slowdown expected: IMF

ROME, May 20 (Xinhua) -- The International Monetary Fund (IMF) on Monday said that while Italy had good recoveries from economic shocks in recent years, the economy's prospects were only "moderate" going forward.

In its annual Staff Concluding Statement, the IMF said that Italy recovered from the back-to-back shocks of the coronavirus pandemic and the spike in energy prices sparked by the Ukraine crisis and that as of the end of the first quarter of this year, its economy was 4.5 percent larger than before the pandemic -- "a stronger performance than in other large euro-area countries," the IMF said in a statement.

That growth, the fund said, was fueled by a recovery in tourism, tax credits, and projects funded by European Union (EU) pandemic recovery loans and grants.

But the IMF said Italy was unlikely to continue to out-perform, with models predicting the country's economy would grow by 0.7 percent in both 2024 and 2025. It said the country could subsequently see a "temporary growth slowdown in 2026 and 2027."

The predictions for the next two years are already weaker than the prognostications from the EU, which sees Italy's economy growing by 0.9 percent this year and 1.1 percent next year. The EU has not made concrete economic growth predictions for 2026 or beyond.

The IMF said the main factors leading to the relative slowdown are an end to the funding from the EU's pandemic relief plan. It also said that "while contributing to the recovery, expansionary fiscal policy has also kept the deficit and public debt very high, elevating Italy's risk premium and acting as a drag on private sector investment."

It said that reducing debt, reinforcing the country's financial sector, planning for future shocks to the system, and increasing employment levels could help improve Italy's economic prospects going forward.

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