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Free AccessREPEAT: MNI: Italy Inward Investment Shows No Vote Unease: BOI
Repeats Story Initially Transmitted at 12:14 GMT Jan 23/07:14 EST Jan 23
--Italy Recovery Becoming Self-Sustaining, Helped By Consumption, Investment
By Silvia Marchetti
ROME (MNI) - The increased purchases of Italian securities by foreign
investors underlines an absence of significant election-related market unease, a
Bank of Italy source told MNI in an exclusive interview.
Italy's vote was not currently being perceived as a "destabilising,
worrying factor", the source noted, though much will depend on how effective the
future government is in pursuing pro-investment measures and hitting debt
reduction targets.
The boost in market confidence and continued foreign capital inflows
underlines that there are no signs of risks related to the uncertainty around
the outcome of the upcoming election, the source said.
Expected for much of 2017, national elections were finally called by
President Sergio Mattarella in late December and will take place on March 4.
According to the central bank's recent Economic Bulletin, 2017 saw
foreigners' net purchases of Italian portfolio securities reach a total E25.5
billion, with E6.4 billion in public sector securities.
"It should be noted that last year foreign investors showed interest not
just in Italian public sector securities but also in those issued by the private
sector," the source told MNI.
Private investment focused mainly on banks' shares and bonds, partly in
connection with the recent recapitalisation of some major Italian banks that are
contributing to strengthen Italy's financial sector.
--BTP/BUND SPREAD
The spread between German and Italian government bonds remains relatively
narrow, another good sign of investor ease, according to the source.
The overall upbeat sentiment is in part attributable to Italy's continued
economic recovery and the favourable reaction of market participants to the
European Central Bank's announced recalibration of monetary policy, the BOI
source added.
Last week, the Bank of Italy upped its GDP forecasts to 1.4% this year from
a previous 1.3%, and to 1.2% in 2019 and 2020. All forecasts are more favourable
than those recently published by the Commission (1.3%), but in line the the
latest IMF update and just below those of the OECD (1.5%).
Italy's longer-term rosier economic outlook reflects a significant change
in what now drives the country's growth rates.
--SELF-SUSTAINING GROWTH
"The good news is that a large portion of consolidated growth this year
will be self-sustained, meaning it will only be in part supported by a mix of
accommodative monetary policy at central level and expansive economic policies
at government level," said the source.
According to the bank's estimates, monetary policy measures across the bloc
will help sustain Italy's growth by a little under 0.5% per year in the two
years 2018 and 2019, while the performance of the public finances is expected
to help boost output by around 0.2% both this year and the next.
"So we have a total of just 0.7% external support now. Last year this
portion was higher, around 1%," said the source, arguing that output continues
to benefit from the support of expansionary economic policies, albeit to a
relatively smaller degree.
On the one hand, this reflects market expectations of a gradual withdrawal
of monetary stimulus. On the other, it shows the growing autonomous support to
domestic demand originating from the brighter outlook for household disposable
income and firms' higher investment rates.
The source stressed that the ECB's current monetary policies are "necessary
and proof is, these measures are bearing fruit", warning against an abrupt
unwind of monetary policy.
"The eventual normalisation process must be gradual and prudent,
accompanied by patience in monetary strategy," he said.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.