Italy: The show must go on

12/5/2016 - Report
ic_blogtagItalyGross Domestic Product (GDP)GrowthReforms

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​Italians voted No to constitutional reform in a referendum (59.1%) and Prime Minister Renzi resigned. In 2017, political uncertainty can cause a mild confidence crisis. If there are no spillovers to banks or the bond market as the baseline scenario suggests, the downturn may shave off -0.3pp of Italian GDP. In this case, the economy should grow by a mere +0.6%. 

A knee-jerk reaction is inevitable. But a 2011-12 style financial stress, which would cost -0.7pp in GDP growth and push Italy close to zero growth (+0.2%), should be avoided. 

Italian companies will bear the brunt of a confidence shock, albeit a mild one.

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italian-constitutional-reforms-referendum-economic-insight-nov16.pdfitalian-constitutional-reforms-referendum-economic-insight-nov16.pdf