The Italian economy has reversed into recession, with GDP falling by 0.2% by the end of June this year.
This is the fourth time Italy has been in recession in just six years. Italy is Europe’s third largest economy and the recession is the worst since after WWII.
The first three months of the year saw a decline of 0.1%, but analysts had believed that the economy would pick up in the second quarter.
The economy fell further back, however. Two consecutive quarters of negative growth is all that is needed for recession to be declared.
Six years after the financial crisis, Italian real GDP is still 9.1% short of its pre-crisis peak.
The drop in productivity may have been due to a sharp demand for imported goods, despite domestic demand being weak.
There is much debate amongst analysts as to when the country may emerge from recession, with some optimistic that the new prime minister, Matteo Renzi, could introduce more reforms, in addition to his ambitious tax and labour ones and his attempts to curb public spending.
The Italian government remains heavily in debt which will not be lessened if there is no real growth. Official figures show that Italy’s public debt has is now 132% of GDP as faltering industry in the last three years means the state is one of the country’s biggest employers.
