(Bloomberg) — Italy risks entering a recession in the coming quarters as the gas-dependent country struggles with the energy crisis, the International Monetary Fund said.
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The IMF forecast on Tuesday that the Italian economy will contract by 0.2% next year, one of only two euro-area members seen shrinking, alongside Germany.
“We are expecting Italy to enter a technical recession in the coming quarters and a big impact has come from the energy crisis and the elevated inflation and the adverse impact on real incomes,” Petya Koeva Brooks, deputy director of the IMF’s research department, told a news conference in Washington, adding that risks to the outlook are “very much on the downside.”
IMF Chief Economist Pierre-Olivier Gourinchas said the forecast was in large part due to energy prices and Italy’s dependence on gas.
“We are also seeing the impact of the tightening of monetary policy in the euro area and also weak external demand,” he added.
Asked what advice Koeva Brooks had for Italy’s new government, she said it should “focus on providing support to the most vulnerable as opposed to broader measures, keeping in mind the at-risk fiscal space in making sure that debt is on a declining path in the medium term.”
The officials spoke during a press conference on the IMF’s World Economic Outlook, with the fund and World Bank holding their annual meetings in Washington this week.
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