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MILAN — The opinion of Italian businesses on the prospects for the economy improved in the first quarter of 2023 compared with the previous three months, the Bank of Italy said on Thursday, as inflation expectations fell.

In the first three months of the year the percentage of Italian businesses that expected better economic conditions rose to 14.9% from 6.3% in the previous three months, the Bank of Italy said in its quarterly survey.

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The percentage of those expecting worsening economic conditions almost halved to 23.7% from 47%.

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Italian Economy Minister Giancarlo Giorgetti said in March the outlook had brightened since a 0.1% quarterly fall in gross domestic product at the end of 2022, and the country was likely to avoid a second quarter of contraction at the start of this year.

Expectations are less gloomy thanks both to stronger demand and falling energy prices, the survey said.

In contrast to the fourth quarter of 2022, inflation forecasts decreased “probably thanks to the strong fall in the Consumer Price Index seen at the start of the year,” the central bank added.

In February Italian inflation was revised down slightly due to the energy prices decline but core components accelerated.

Firms’ expectations for consumer price inflation in 12 months time fell to 6.4%, compared with 8.1% in the previous survey. Over a two year horizon the expectation was for a 5.3% inflation rate, down from 6.7%.

Problems due to sky-rocketing inflation lessened and employment expectations in the second quarter are positive for all sectors.

The survey was conducted between Feb, 24 and March 17 among Italian industry and services businesses with at least 50 employees.

The banking crisis triggered by the U.S. lenders Silicon Valley Bank and Signature Bank erupted on March 10. (Reporting by Sara Rossi Editing by Keith Weir)