In Q3 2019 Italian GDP increased by +0.1% with respect to the previous quarter. On an annual basis, the rate of expansion registered at +0.3% - the highest in a year. While on the positive side the Italian economy has avoided slipping into recession this year, it has largely treaded water since Q1 2018 as external headwinds coupled with elevated domestic political uncertainty simply proved too much to handle. Going forward, with political uncertainty more contained since the Europhile PD&M5S coalition took over in early September and the ECB taking another dovish turn, domestic demand should stage a timid comeback. The sweeping victory of Salvini’s Lega party in regional elections in Umbria last week, however, showed that the political outlook is far from certain. External headwinds will meanwhile continue to test the resilience of Italian exports until next year, so that overall we expect GDP growth to accelerate only slightly to +0.4% in 2020, after +0.2% in 2019.
