Offices are seen at the Gae Aulenti square at Porta Nuova district downtown Milan, Italy, November 20, 2017. REUTERS/Stefano Rellandini/Files

MILAN (Reuters) – Italy’s economy will shrink by 0.3 percent this year, JPMorgan analysts said, in the gloomiest forecast by a major U.S. bank for the euro zone’s third biggest economy.

Official data show Italy’s economy fell into its third recession in a decade during the second half of last year, and recent business surveys suggest the economy remains sluggish.

The European Commission last week slashed its forecasts for Italy’s economic growth in 2019 to 0.2 percent, well below the populist government’s forecast of 1 percent.

JPMorgan said it forecast an economic contraction of 0.75 percent in the first quarter of the year, adding that a widening of the spread between benchmark 10-year Italian bonds and their German equivalent may add to downside risk.

“At this stage, we estimate that Italy’s 2019 (budget) deficit will climb to 2.8 percent of GDP, which, together with our growth forecast, implies an increase in the debt ratio to 133.5 percent of GDP (up from 132 percent in 2018),” it said in a report.

Italy’s public debt stood at 132 percent of gross domestic product last year, proportionally the second highest after Greece in the 28-nation European Union.

Reporting by Silvia Aloisi; Editing by Gareth Jones


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