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ECONOMY

Italy’s economic prospects improve as virus numbers fall further

Italy's statistics agency on Friday upgraded its growth forecast, with the economy set to improve faster than thought.

Italy's economic prospects improve as virus numbers fall further
Italy's prime minister Mario Draghi has reportedly carved out luxury goods from EU sanctions against Russia. (Photo by Miguel MEDINA / AFP)

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.

READ ALSO: Fast trains and extended building bonus: How Italy’s EU recovery plan could affect you

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.

CHARTS: How many people has Italy vaccinated so far?

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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MONEY

EXPLAINED: Why people in Italy might have to carry more cash from now on

Italian retailers will no longer face fines for refusing card payments on amounts lower than €60, after the government put the brakes on a recent push towards electronic payments.

EXPLAINED: Why people in Italy might have to carry more cash from now on

Italy’s new budget bill is set to add yet another controversial chapter to the country’s long and troubled history of card payment laws.

Under Italy’s new budget law, retailers will no longer be fined for refusing card payments for smaller amounts – a controversial move that is expected to have a knock-on effect for shoppers.

READ ALSO: Key points: What Italy’s new budget law means for you 

Fines for retailers refusing card payments on amounts lower than €60 will now be suspended until at least June 2023, according to a clause included in the text of the 2023 budget law published to media on Wednesday.

As set out by the bill, the six-month suspension will allow the newly created Ministry of Enterprises and Made in Italy to “establish new exemption criteria” and “guarantee the proportionality of the given penalties”.

And, though it isn’t yet clear what new exemptions the government is currently considering nor what exactly is meant by “proportionality”, what’s certain is that residents who had started to make more purchases by card will now have to repopulate their pockets with some good old banknotes because businesses – from taxi drivers to cafes and bars – might not accept card payments for small amounts.

Fines for businesses caught refusing card payments had been introduced by Draghi’s administration back in June 2022, with retailers liable to pay “a €30 administrative fee plus four percent of the value of the transaction previously denied”, regardless of the amount owed by the customer. 

Euro banknotes in a wallet

Under Italy’s new budget law, retailers will no longer be forced to accept card payments for transactions under €60. Photo by Ina FASSBENDER / AFP

The measure angered retailers who lamented having to pay hefty bank commissions on every electronic transaction – some business owners even went as far as openly defying the law and organised themselves into a protest group (Comitato No Pos, roughly meaning ‘Anti-point-of-sale committee’). 

Given the government’s new legislation, it seems like their efforts might just have paid off. 

But, while many business owners will no doubt be happy with the suspension, others have already raised doubts about the potential ripple effects of the government’s move.

Aside from shoppers having to carry more cash than they’re currently used to, many political commentators are warning that the suspension might be a “gift to tax dodgers” in a country where, according to the latest available estimates, tax evasion costs state coffers nearly €90 billion a year.

The same was said about another of the government’s recent changes: raising the cash payment limit from 2,000 to 5,000 euros.

READ ALSO: What’s changing under Italy’s post-pandemic recovery plan? 

A previous government led by Giuseppe Conte had introduced several measures aimed at encouraging the use of electronic payments, most of which have since ended or been rolled back.

The introduction of fines for businesses refusing card payments was one of the financial objectives set out within Italy’s Recovery Plan (PNRR), which expressly refers to the fight against tax evasion as one of the country’s most urgent priorities. 

It is therefore likely that the new cabinet will at some point have to explain the latest U-turn on Recovery Plan policies in front of the EU Commission.

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