Italy halves 2025 growth forecast over tariff fears: govt source

AFP | London
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Italy's government is preparing to slash its 2025 growth forecast from 1.2 to 0.6 percent amid concerns about US tariffs, a government source told AFP Wednesday, with Spain also bracing for a hit.

Levies of 20 percent on EU products came into force on Wednesday as part of US President Donald Trump's trade offensive that has roiled markets and sparked fears of a global recession.

The new Italian forecast is included in the economic roadmap for the coming years, which is expected to be approved by Prime Minister Giorgia Meloni's cabinet later on Wednesday.

Meloni, leader of the far-right Brothers of Italy party, has urged both sides to reach a deal and announced Tuesday she would visit Washington on April 17 to talk to Trump directly.

Italy, the eurozone's third largest economy, is the world's fourth largest exporter and risks being hard hit by the new tariffs.

Around 10 percent of its exports go to the United States, and last year Rome had a trade surplus with Washington of 38.9 billion euros.

Despite her efforts to avoid antagonising Trump, Meloni has criticised the tariffs as "wrong", and repeated Tuesday that "a trade war between Europe and the United States does not suit anyone".

Speaking to businesses, she said it was difficult to precisely assess the impact on Italy, but warned against "panic and alarmism" that she said "risk doing more damage than the measure itself".

Meloni announced plans to repurpose up to 25 billion euros ($27 billion) of EU funds already allocated to Italy to help mitigate the impact on businesses.

The Bank of Italy last week also revised its growth forecast for this year, down from 0.7 percent to 0.5 percent.

Additionally, it lowered its estimates for 2026 and 2027, now forecasting 0.9 percent and 0.7 percent respectively, compared to 1.2 and 0.9 percent previously.

- Spain braces for impact -

In EU peer Spain, one of the world's most dynamic developed economies, the central bank governor said the turmoil unleashed by the tariffs would mean "we will have to revise downwards the growth forecasts", set at 2.7 percent for 2025.

"What I cannot say at the moment... is how much," Bank of Spain governor Jose Luis Escriva told public broadcaster TVE on Wednesday.

The tariffs will affect around 80 percent of Spain's exports of more than 18.6 billion euros to the United States, Spanish Economy Minister Carlos Cuerpo said on Tuesday.

Socialist Prime Minister Pedro Sanchez proposed last week an aid package worth 14.1 billion euros to help sectors such as olive oil and wine to weather the trade storm.

The European Union's fourth-largest economy expanded 3.2 percent last year thanks to strong household consumption, exports and a booming tourism industry, comfortably outstripping sluggish eurozone peers.