Italy hopes for better year

Press, 9 April 1980, Page 10

Italy hopes for better year

NZPA-Reuter Rome, Hopes are emerging that Italy’s shaky economy, beset by high inflation, is still managing to grow despite the harsh international economic climate. The shops and restaurants of Rome are full, and Italy’s host of traditionally skilful traders are still hard at work. Its exporters increased their sales by nine per cent last year and are fighting to keep their prices competitive. The Italian economy is expected to grow between 1.5 and 2 per cent this year, according to authoritative banking sources. This would be well below last year’s growth of 5 per cent, but it would be better than, that of many industrialised countries which expect more serious slowdowns of their productivity. Last year’s- growth was much better than the record of most industrials ■ised nations, ~ and; “The economy is still growing,’? one top banking source said. Italy had a healthy current account balance of payments surplus in 1979 of about $6 billion and its net official reserves rose

to a" big $38.1 billion from $25.2 billion in 1978. The country can also look forward to the usual huge influx of foreign exchange this (Northern) summer from millions of free-spending tourists. There are several big factors on the gloomy side.

The biggest headache is Italy’s inflation rate, well over 20 per cent., provoked by strong demand, rising labour costs and oil prices rises. For the first two months of 1980, inflation was at an equivalent of an annual rate reaching 30 per cent, but this, is not expected to continue. Monetary officials oppose any rises in Italy’s sky-high interest rates.-— well over 20 per cent for most private borrowers — to dampen the economy. Italy’s trade, deficit in January was a huge $1.4 billion, more than treble the figure for January, 1979. The December deficit was also treble the figure for December, 1978. Inflation for 1979 was about 20 per cent, compared with 12 per cent in 1978.

There has also been no apparent effort to cut

back what many commentators regard as Italy’s swollen bureaucracy and loss-making nationalised industries, which critics say form a big barrier to economic growth. The Treasury Minister

(Mr Filippo Pandolfi) and the Bank of Italy president (Mr Carlo Ciampi) are trying to keep the public sector borrowing requirement this year to $48.5 billion, but there are fears that it may reach $5l billion. This huge sum is fully two-thirds of the total growth of internal credit planned by the Bank of Italy for 1980, meaning that only one-third will go on productive private investment. Public spending programmes are still uncertain because the Budget, which should have been approved ■ last year, is bogged down, in Parliament since Prime Minister Francesco Cossiga’s weak 7m i nor ft y Government could not push it through on time.Yet despite gloomy predictions .of a recession there are no signs of it so far. The hope is that Italy’s traders will keep the economy afloat.