Italy's GDP to fall 9,5% (from 9% expected last month) in 2020 in the baseline scenario, i.e. if the spread of the Covid-19 pandemic remains under control at national and global level. If, on the other hand, new significant outbreaks emerge, "GDP could fall by more than 13% this year" with a more moderate recovery in subsequent years compared to the baseline scenario, which forecasts +4,8% in 2021 and +2,4% in 2022. These are the forecasts contained in the economic bulletin published by the Bank of Italy.
Going into detail, according to Palazzo Koch, after the -5,3 percent recorded in the first quarter, "the contraction in GDP would have accentuated in the second quarter: on the basis of available information, it is currently estimated at around 10 percent". April was the worst month, when economic activity reached its lowest levels in all sectors: “The most timely economic indicators, of both a qualitative and quantitative nature, show signs of improvement since May, in conjunction with the gradual easing of the measures to suspend production activity".
On the other hand, the prospects for the next few months are better. The 2020 GDP, after the collapse of the first half, could start to expand again in the second. The projections, according to the bulletin, include the impact of the "Cura Italia" and "Relaunch" decrees, which together amount to around 4,5% of GDP. "It is estimated that these measures, largely temporary, could mitigate the fall in output by more than two percentage points this year."
The prospects, both for the next six months and for the next few years, could improve with the "strengthening of the expansive policies currently under consideration". According to the Bank of Italy, “the approval e the effective use of the instruments under discussion for the European Union, in addition to having a direct impact on demand and production capacity, they could contribute to a recovery in the confidence of households and businesses. The amount of resources that it will be possible to benefit from will depend on the ability to propose and implement sound reforms and investment projects”.
Moving on to industrial production, in the first half the decrease was equal to -8,4%, while in April there was a real collapse, but "with the gradual removal of the closure measures, industrial activity would have returned to growth in May and June (overall by about 40% compared to April)”. Despite this, however, production is expected to remain nearly 25% below pre-coronavirus levels.
For household spending, according to Bank of Italy estimates, after the reduction in the first quarter (-6,6%, the decline also continued in April, while a partial recovery was recorded in May.
The disposable income of households in real terms instead decreased by 1,7% compared to the previous quarter, reflecting the reduction in labor income. The propensity to save increased by 12,5%.
Finally, speaking of businesses between March and May growth in bank lending to companies 'has sharply increased', with +11,5% on an annual basis (+23 billion), benefiting "from the interventions to support liquidity by the government and other national and international bodies". The bulletin specifies that if between March and April the greatest loans concerned almost only medium-large companies, in May “net loans to producer households also increased, by 2,1 billion (+32% compared to April).
Credit to households - underlines the document - "on the other hand contracted overall" (-2,5% in the three months ending in May, from 1,1 in February) in the face of a weaker trend in mortgages and credit consumption.
