The Italian economy this year will be in recession, inflation will rise and consumer spending will fall, according to the latest economic outlook from the industrial employers association Confindustria.
GDP, Confindustria predicted, will fall by 0.1% in 2008 but the economy should pick up again in 2009 and allow for a 0.4% rise in GDP.
Confindustria added that this will be Italy's third postwar recession after the one in 1975 provoked by the oil crisis and the one 1993 brought on by the public finance crisis.
In order to boost the economy Confindustria said it was ''absolutely necessary'' to cut taxs which currently eat up 53% of earnings.
Inflation is expected to average out at 3.6% for the year to then retreat to 2.5% in 2009. In 2007 inflation was 1,.8%.
Consumer spending, which rose 1.4% in 2007, will sink by 0.1% this year.
This will be the second time since the the Second World War that consumer spending has declined. The first was in 1993.
In its latest economic outlook, Confindustria said the national debt will be 103.7% of GDP, compared to its previous forecast of 103.2%, to then decline to 102.9% of GDP in 2009.
The government has calculated that the debt will level out at 103.9% of GDP this year and fall to 102.7% in 2009.
Confindustria confirmed its previous forecast that Italy's spending deficit will be 2.5% of GDP this year and 2.2% in 2009.
The employers association noted that public spending this years will climb to 49.9% of GDP in 2008 to then decline slightly to 49.7% next year.
The following Confindustria table compares data from 2007 to forecasts for 2008 and 2009:
2007 2008 2009.
-------------------------------------------------------
GDP 1.5 -0.1 0.4.
CONSUMER SPENDING 1.4 -0.1 0.4.
UNEMPLOYMENT 6.1 6.5 6.8.
INFLATION 1.8 3.6 2.5.
BUDGET DEFICIT (over GDP) 1.9 2.5 2.2.
NATIONAL DEBT (over GDP) 104.0 103.7 102.9.
