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Bank Of Italy Sees Around 9.5% GDP Contraction This Year On Covid-19

Italy's economy is set to contract by around 9.5 percent this year due to the impact of the coronavirus pandemic, and then recover gradually over the next two years, the Bank of Italy said on Friday in its latest economic bulletin.

In June, the bank had forecast 9.2 percent decline in national output. The economy grew 0.3 percent in 2019.

The economy is projected to grow 4.8 percent in 2021 and 2.4 percent in 2022.

"The recovery will be gradual: persistent effects on household consumption will stem from the decline in employment and in disposable income, albeit mitigated by the support measures," the bank said.

Further, investment is seen to be impacted this year by the deterioration in the outlook for demand and firms' confidence. The decline is expected to be partly recouped in 2021-22.

Inflation will be practically nil both this year and the next, and prices are expected to return to a growth of 1.0 per cent in 2022, the bank added.

The country is among the worst hit in Europe due to the coronavirus, or Covid-19, pandemic.

The Italian economy shrunk 5.3 percent in the first quarter. The decline intensified in the second quarter and is likely to be around 10 percent, the bank said.

This estimate primarily reflects the highly unfavorable performance in April, while motorway traffic, gas and electricity consumption suggest that economic activity began to recover in May, encouraged by the progressive easing of restrictions, the bank noted.

Foreign trade and tourism continues to be impacted by the pandemic. The labor market was also hurt severely as reflected by the sharp drop in employment and rising unemployment rate. Recent data suggest a rebound in the job market.

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