International Monetary Fund said that the possibility of Italy’s economic recession stretching into 2010 cannot be ruled out amid the global slump and financial crisis. It added that "In line with the rest of the euro area, Italy is being severely affected by the worsening economic environment, although its financial sector has remained relatively resilient."

IMF said after completing a review of Italy’s economy that "The economic recession is deepening, and while a gradual recovery is expected in 2010, the possibility of a prolonged downturn cannot be ruled out. The economy’s recovery, however, is likely to be slow and weak, reflecting underlying structural rigidities, lack of domestic competition and limited scope for a fiscal response."

The 185 nation IMF routinely conducts the reviews, known as IV consultations, with member countries. The IMF confirmed in the report its outlook for the Italian economy, published on January 28th 2009, projecting three consecutive years of contraction in gross domestic product, a broad measure of economic activity.

According to the IMF, Italy’s GDP contracted an estimated 0.6% in 2008 and will shrink 2.1% in 2009 and 0.5% in 2010. It expressed concern about Italy’s ballooning public deficit, which it forecast would reach 2.7% of GDP this year and 3.9% of GDP in 2010.

Following exceptionally strong revenues in 2006 and 2007, the IMF warned that the revenue based fiscal consolidation has come to an end, projecting that public debt would swell to 105.6% of GDP in 2009 and 109.4% of GDP in 2010.

The IMF, which has called on Italy in recent years to undertake structural economic reforms, stressed that the importance of reducing regulation, increasing competition and improving business environment to raise productivity and growth potential.

(Sourced from business.inquirer.net)