Italy´s debt load will begin declining in 2016, Unicredit says
A weak rate of growth in nominal gross domestic product - as a result of low inflation - had kept the country´s stock of debt as a percentage of gross domestic product from declining, Unicredit Research economist Dr. Loredana Federico said in a research note sent to clients.
It had offset improvements in the country´s underlying fiscal situation in the wake of the sovereign debt crisis, she said.
However, Loredana projected the Mediterranean country´s debt load would begin to trend lower in 2016m with the decline accelerating in 2017.
"We estimate that oil prices would need to decline towards USD 15/bbl to prevent a decline in public debt/GDP within the next two years," the economist said.
As well, the continuing fall in the implicit cost of the debt and an investor base which was still mainly domestic, mitigated the risks of fiscal stress in the short-term.
For the longer-term, Italy´s public debt burden appeared to be "much more manageable relative to peers when contingent liabilities are taken into account," Federico said.
The deterioration in Italy´s unit labour costs had also stopped, the researcher said.