According to recent estimates of the International Monetary Fund (source: World Economic Outlook Update, July 2018), the Italian economy will continue to grow in 2018, although more slowly than 2017. Specifically, the growth rate of GDP is expected at +1.5%, whereas the inflation rate will be steady at +1.3%. In line with the persisting expansionary trend of the economic cycle, the labour market is expected to improve, with employment projected to grow by 0.9%, alongside a slight decrease in the unemployment rate to 10.9% (source: Bank of Italy, Macroeconomic Projections for Italy, July 2018).
Monetary policy and interest rates
In June 2018, the European Central Bank (ECB) announced the end of the asset purchase programme, known as “quantitative easing”, with effect from December 2018. Nevertheless, the monetary policy will continue to be accommodative, due to the reinvestment of the principal payments from maturing securities and key policy rates unchanged at least through the summer of 2019. With regard to the main bank interest rates, the average rate on funding from resident customers fell steadily reaching levels very close to zero. In the sovereign debt market, there has been an escalation of tensions starting as of mid-2018 on the Italian 10-year government bond, resulting in a widening of the yield spread with respect to the German and French counterparts.
Lending and funding in CDP’s reference market
In light of the economic recovery, the credit sector has shown a positive trend in the first half of 2018. On the funding side, the relative stability and the excellent performance of deposits reflected in the lower use of financing from the ECB. On the other side, bank loans to the private sector (adjusted for securitisations) showed a positive dynamic, as a result of the solid performance of loans to households and of loans to enterprises returning to growth. Bank lending to General Government decreased. The prospects of bad loans held by Italian banks have also improved in terms of both new inflows and volume, continuing the downward path started as of June 2017. Also Italian families benefited from the positive economic and financial trend, with their wealth reaching approximately over 4 trillions euro.