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Bank of Italy: Economy to expand by more than 0.5pc this year

Bank of Italy: Economy to expand by more than 0.5pc this year

MILAN: Ignazio Visco, Bank of Italy Governor said the Italian economy is expected to grow more than previously forecast this year and the next as a result of the European Central Bank’s bond buying program

Visco said the Italian central bank now expects the euro area’s third largest economy and it’s most sluggish to expand by more than 0.5 per cent this year and more than 1.5 per cent the next.

Italy has not posted a single quarter of growth since the middle of 2011. Visco said that the last quarter of 2014 would be no exception mainly due to a further drop in investments.

Only last month, the Bank of Italy had cut its 2015 growth forecast to 0.4 per cent, warning that economic recovery would be slow and fragile. Its 2016 growth estimate was previously 1.2 per cent.

The European Commission said this week Italy would grow by 0.6 per cent this year and 1.3 per cent the next, while it saw the whole euro bloc expanding by 1.3 per cent and 1.9 per cent respectively.

The ECB has announced a quantitative easing (QE) scheme and will buy 60 billion Euros of assets a month starting from March, targeting mainly government bonds.

The scheme is set to run until September 2016 or until there has been a sustained improvement in euro zone inflation, which has recently turned negative.

Visco quantified the amount of Italian government bonds the central bank would buy as part of the ECB program as around 130 billion Euros (96.5 billion pounds).