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This publication presents the economists' forecasts for interest rates, exchange rates and commodity prices, along with the Crédit Agricole Group's central economic projection.
The new government has scant leeway for its first main task, the 2019 budget, owing to the multi-year fiscal trajectory negotiated with the European Commission that is ill-compatible with electoral promises. It is in this area, as well as in the continuation of the structural reforms introduced by the outgoing government, that the reliability of the new coalition will be judged by European partners, rating agencies and investors.
The consolidation of productive investment and a swifter decrease in unemployment feed into a more autonomous growth. This benefits the banking sector by sustaining restructuring efforts, more than ever dominated by a race to reduce NPLs. On the political front, the scenario of a post-election coalition between Forza Italia, the Centre and M. Renzi's democratic Party is loosing strength due to the latter's weakening.
Having seen off the risk of a snap election at the beginning of the summer, Italy's political class was able to take a break before getting back to work with preparations for the forthcoming general election. The current parliamentary term is due to expire on 15 March 2018, but the chambers are likely to be dissolved as soon as the final Budget Act has been passed, no later than mid-January. Elections will then be able to take place between 45 and 70 days after the dissolution of parliament, thus opening up a window between March and June. The date is therefore more or less known.
Matteo Renzi has returned to frontline politics following his overwhelming victory in the Democratic Party (PD) primary. The relatively high turnout gave him sufficient legitimacy to go back on the campaign train for the upcoming partial local elections in June, and above all for the spring 2018 general election. The temptation to quickly spend his political capital by provoking the fall of the Gentiloni government and calling for an early general election in September 2017 is great.
Markets and institutional organisations favour a better recent dynamic in Spain, while Italy stands out as benefitting from a better status on various economic dimensions. Spain has started earlier implementing a series of post-crisis structural reforms, while Italy was standing on a better reform track in the 1990s. The latest impressive round of Italian structural reforms is too young to unveil their impact and has not been fully taken into account by observers.
We have had to revise down our cautiously optimistic March outlook slightly, for two reasons. First, US growth will be lower than expected in 2015 due to a disappointing first quarter. Secondly, the slowdown in the emerging countries will be a little more marked than originally forecast, with recessions in particular. Despite the improved outlook for growth in the Eurozone, the world economy as a whole is ultimately set to grow more slowly in 2015 than in 2014, before a rebound in 2016.
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