ROME, Dec 4 (Reuters) - The Italian economy will grow by 0.2% this year, national statistics bureau ISTAT said on Wednesday, marginally trimming the outlook from a 0.3% projection it made in May. The new projection is above the latest official forecast by the government of the anti-establishment 5-Star Movement and the centre-left Democratic Party, which in September estimated gross domestic product growth of 0.1%. However, Economy Minister Roberto Gualtieri said last month it would be at least 0.2%. Sharp inventory contraction is the main reason for the weakness of growth this year, ISTAT said, estimating that this will subtract 0.8 points from the annual growth rate. Domestic demand net of inventories will contribute 0.8 points, with equal contributions of 0.4 points from consumer spending and investments. Trade flows will contribute 0.2 points. ISTAT estimated in its twice-yearly forecasting note that GDP growth would accelerate modestly to 0.6% next year, thanks to relatively firm domestic demand. This is in line with the government's official forecast. Trade flows will contribute just 0.1 points to annual growth in 2020, ISTAT estimated, while inventories will continue to contract but less steeply than this year. ISTAT warned of downside risks to its forecasts due to tensions over international trade tariffs and "geopolitical turbulence" which could also hurt global trade. The statistics institute sharply cut its estimate for the average unemployment rate this year to 10.0% from a 10.8% forecast made in May, and it forecast a marginal decline next year to 9.9%. (Reporting by Gavin Jones) ((Rome newsroom +39 06 8522 4350,firstname.lastname@example.org))
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