The Report on Recent Economic Developments of January 2016 analyses the Italian and international economic situation on the basis of the most recent indicators. The moderate recovery in the Italian economy continued between the close of 2015 and early 2016. Adjusted for the number of working days, growth in 2015 is expected to amount to 0.7 per cent (0.8 per cent on an unadjusted basis). On the basis of these assessments, annualized growth for 2016 (i.e. the growth that would be registered if GDP growth remained at the level estimated for the first quarter) would be 0.7 per cent. Services and a slow revival of the construction sector are sustaining current economic activity. The recovery of industry has weakened and has so far been modest and narrow. Compared with the first half of 2015, the improvement in labour market conditions has slackened, although the strong responsiveness of employment to cyclical conditions has been confirmed. The proportion of fixed-term employees that have shifted to permanent contracts has increased. Falling oil prices and the weakness of demand-side pressures have kept the inflation rate close to zero.
The Italian recovery is exposed to risks in the international environment. Fears about China and the fall in oil prices have fuelled financial and currency instability, intensifying global deflationary pressures. A further substantial decline in oil prices would not be entirely welcome news for importing countries. By reducing inflation expectations, it tightens monetary conditions. The European Central Bank’s action to counter deflation through QE is challenging, as demonstrated by the decline in inflation expectations despite the strengthening of the monetary stimulus. The decline in oil prices also worsens the financial situation of oil producers, triggering sharp slowdowns. In January, the IMF again lowered its forecast for world trade growth in 2016 and 2017 to 3.4 and 4.1 per cent, respectively.