Italy's GDP to shrink 9.5 pct in baseline scenario: central bank
Italy's gross domestic product (GDP) will likely contract by 9.5 percent this year due to the fallout from the coronavirus pandemic, the Bank of Italy forecast in a 77-page Economic Bulletin released on Friday.
Italy's GDP is set to contract by 15 percent in the first half of the year and to expand slightly in the second half "largely due to the end of the effects of the containment measures," the Bank of Italy wrote in reference to the March 10-May 3 national lockdown that paralyzed the country's economy but brought the COVID-19 pandemic under control.
This contraction in 2020 would be followed by "a gradual recovery in the following two years," with GDP expanding by 4.8 percent in 2021 and by 2.2 percent in 2022, according to the Italian central bank.
This baseline scenario also sees foreign demand for Italian goods shrinking by 13.5 percent this year, followed by an expansion of 7.9 percent in 2021 and by 4.6 percent in 2022.
Exports will likely fall by 16 percent in 2020, and expand by "about 6 percent in 2021-2022," the Bank of Italy wrote.
These numbers are based on a baseline scenario in which "the pandemic remains under control both on a global level and in Italy, and the gradual removal of the measures to contain the infection continues," central bank analysts wrote.
However, a second and more negative scenario is also possible if the pandemic continues and new outbreaks spark more lockdowns, damaging business and household confidence, causing further significant drops in global trade, creating bottlenecks in global value chains, and causing a "marked deterioration of financial conditions," the central bank warned.
In the second scenario, Italy's GDP would contract by 13.5 percent this year and recover moderately in 2021 (up by 3.5 percent), the Economic Bulletin explained.
Central bank analysts cautioned that it is difficult to make accurate forecasts at present due to "uncertainty as to the duration, virulence, and geographical extension" of the pandemic.