Italy’s economic prospects improve as virus numbers fall further

Italy's economic prospects improve as virus numbers fall further
Shoppers at Milan's Galleria Vittorio Emanuele II. Photo: Miguel Medina/AFP
Italy's statistics agency on Friday upgraded its growth forecast, with the economy set to improve faster than thought.

Italy’s statistics agency Istat on Friday pointed to a faster-than-expected recovery from the coronavirus pandemic.

Istat predicted growth of 4.7 percent in 2021, up from the 4.0 percent growth forecast last December, and 4.4 percent in 2022.

The government, for its part, has forecast growth of 4.5 percent in 2021 and 4.8 percent in 2022.

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Italy’s economy – the eurozone’s third largest – grew slightly in the first quarter, Istat said on Tuesday as it reversed a previous estimate of a contraction in the first three months of the year.

On Friday, Istat said it expected economic activity to intensify in the coming months, driven by domestic demand, and extend into 2022.

It said the government’s 222-billion-euro post-virus recovery plan, funded in large part by European Union loans and grants, “should provide a more intense stimulus”.

People enjoy bar and restaurant terraces along the Naviglio canal in Milan. Photo: Miguel MEDINA / AFP

Gross domestic product (GDP) was up by 0.1 percent compared with the previous quarter, national statistics office Istat said in a statement on Tuesday.

Agriculture and industry had contributed to the economic recovery in the first quarter, with quarterly growth of 3.9 percent and 1.8 percent, respectively.

Istat also said that employment in April rose by 0.1 percent from March.

However, the labour market is still depressed compared to pre-pandemic levels — in February 2020, employment figures were higher by 800,000.

Infection rates fall again

Italy was the first European nation to be hit by the Covid-19 pandemic and remains among the worst affected, both in health terms and economically, with GDP slumping by a staggering 8.9 percent last year.

However, infection rates are falling and the vaccination campaign has picked up speed, resulting in the lifting of many coronavirus restrictions.

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Italy’s latest health data on Friday confirmed the downward trend had continued for another week.

The national average Rt reproduction number had dropped to 0.68 from 0.72, according to the latest weekly coronavirus monitoring report of the health ministry and the Higher Health Institute (ISS).

The report said for a third week in a row that all of Italy’s regions can now be considered low risk, with Rt numbers below 1.

This week, cafes and restaurants were allowed to serve customers indoors and sport stadiums reopened to the public as rules were eased further.

Coronavirus curfews were lifted from Monday in three regions with low infection figures, including tourist favourite Sardinia.

It’s hoped that the same easing of measures could be extended across most of the country in coming weeks.

“Italy is strong, alive and is yearning to restart. The pandemic months have been very tough, for workers and businesses,” Prime Minister Mario Draghi said during a visit in the northern Emilia Romagna region on Tuesday.

“But thanks to sacrifices made by Italians and the strong acceleration of the vaccination campaign, we are facing a new phase,” he added.

Italy is due to receive EU loans and grants worth 191.5 billion euros ($233.5 billion) between 2021 and 2026, and the government has pledged a raft of reforms to put them to good use in its recovery plan (‘piano nazionale di ripresa e resilienza‘ or PNRR).

The support measures put in place include funds for renovating energy-inefficient buildings and plans to upgrade public transport and wifi connections, as Italy’s government says it aims to use the money to upgrade infrastructure and make Italy a “country for young people”.


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