especially among young workers and workers in the southern part of the country.

Fitch, the U.S.-based ratings agency had even more bad news for the economy, warning that state-owned lender Cassa Depositi e Prestiti could face a credit downgrade if it doesn't keep debt levels under control.

But the overall situation may be better than it seems at first glance, analysts said.

"Most of what we're seeing now are what are considered lagging indicators," said Javier Noriega, chief economist with investment bankers Hildebrandt and Ferrar. "The Italian economy is like a huge ship that cannot turn around quickly. But there are a few positive signs that won't show up in the statistics for a few more months."

Most of the weak 2013 growth figure comes from the first half of that year. ISTAT reported around flat economic growth over the last six months, and slightly positive growth in the fourth quarter.

"Flat growth in the final six months isn't great, but it's better than negative growth," said Stefania Tomasini, chief analyst with the consultancy Prometeia. "And most models, including ours, predict the economy will grow this year."

Other positive indicators according to Tomasini, Noriega, and others include the low yield on Italy's bonds -- a barometer of investor sentiment about Italy, where low perceived risk translates to low yields.

On secondary markets, the yield for Italy's benchmark ten-year bond was 3.42 percent, their lowest levels in nearly nine years. A low yield saves the government money because it means it can pay investors less to loan it money.

Production is likely to continue to rise, fueled by exports to the U.S. and other parts of Europe -- among Italy's main export destinations -- where the economic recovery is further along.

Unemployment levels have changed little despite an uptick in production in recent months because most companies have excess capacity. But that is being used up and if production continues to rise, companies will have to take on new workers.

Consumer confidence is also rebounding from near record lows, sparked in part by Renzi's selection as prime minister Feb. 22. Pollsters say Italians are increasingly optimistic about the medium term, even if overall numbers remain low.

"This economy is just starting to show improvement," said Tomasini. "We still need a few months to see how it works out." Endi

Go to Forum >>0 Comment(s)