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(Bloomberg) — The Bank of Italy lowered the country’s economic growth forecast for this year and next due to the impact of the US war on Iran.
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Gross domestic product in the euro-area’s third-biggest economy is seen rising 0.5% in both 2026 and 2027, compared to previous forecasts for gains of 0.6% and 0.8% respectively, according to the central bank’s latest projections released Friday. The institution still sees a 0.8% increase for 2028.
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“The outbreak of the conflict and the spike in energy prices will have a negative impact on the short-term outlook, squeezing domestic demand in the current quarter and in the two quarters ahead,” officials said in the report. “Economic activity is assumed to regain strength in early 2027, as inflationary pressures ease.”
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The Iran war has driven up oil and gas prices, with forecasts for growth being revised in countries including France and Germany.
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Italy, the European Union’s second-largest gas consumer after Germany, relies on the fuel for about 40% of its energy mix, Prime Minister Giorgia Meloni is under pressure to shield citizens with ad hoc tax cuts and other measures. That in turn is putting a strain on public finances, with the government trying to balance between protection and fiscal probity.
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Consumer price inflation is set to rise to 2.6% in 2026, mainly as a result of the surge in commodity prices, and then to return to just below 2% in 2027 and 2028, the central bank said.
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