“Italy rising from an economic chasm but uncertain outcome”

Italy rising from the chasm but the outcome is uncertain. Thus the Confindustria Study Center in the synthesis of the new forecast report. “The top priority for the coming days and weeks is the progress of the vaccination campaign” underlines the Confindustria Study Center. On the basic scenario of the economic trend “there is a high degree of uncertainty – writes the CSC – due to the difficulties in predicting the dynamics of the pandemic crisis, on which future economic trends depend. The underlying hypothesis is that the the road towards the exit from the crisis is traced, with mass vaccination by summer 2021, a precondition for a relaxation of restrictions and a restart of the economy. The determination of the government to achieve the objectives reassures in this sense “.

There would also be a “weaker than expected growth if the rate of contagion of the virus started to rise again, also due to new variants, before the vaccines could be fully available or if the delays in their administration continued, also due to of the distrust of a part of the population that could hinder its adoption “, warns the CSC. Furthermore, “if policy choices end up withdrawing support for businesses and households before the economic recovery consolidates, in the course of 2021, this could generate a growth in bankruptcies, further employment and income losses”.


“At the end of 2022 the long recovery of the Italian economy will lead to the complete closure of the gap generated by the pandemic crisis”. Thus the president of Confindustria Carlo Bonomi on the estimates of the CSC report. “Other large European countries will recover sooner, Germany already at the end of 2021”, observes Bonomi, underlining that the speed of the vaccination plan, the effective and rapid implementation of the Next Generation Eu and some crucial choices will be fundamental for Italy’s recovery. financial policy, such as the extension of bank loans to businesses and the reconsideration of sustainability criteria “.

The United States and China “resumed pre-covid development”. The EU, on the other hand, “is lagging behind and above all the Mediterranean countries risk too slow growth”; the Italian manufacturing industry “is driving the economic stability of our country” underlines the president of Confindustria. As for the tourism sector in Italy, “it requires the utmost attention on the economic policy front to ensure its stability and revival”.


The Csc foresees a gradual recovery of the Italian GDP, concentrated in the second half of this year, reaching + 4.1% in 2021 and + 4.2% in 2022. According to the latest forecast report of the Confindustria Study Center, “at the end of 2022 the economy should fill the chasm opened in 2020 by the pandemic”. Compared to the October scenario, for 2021 there is a downward revision of 0.7 points. This forecast, explains the CSC, is conditioned by the advancement of mass vaccination in Italy and Europe: the hypothesis is that Covid will be effectively contained in the coming months. An important contribution to the rise in GDP will be provided by the effects deriving from European resources that would belong to Italy: according to a Csc econometric simulation, without the Ng-Eu program, the recovery of GDP would be less than 0.7% in 2021 and 0, 6% in 2022.


The public debt in relation to GDP, after the jump of 21 points in 2020, will reach 155.7% this year. Then it will begin to decline, to 152.9% in 2022, due to the improvement in the deficit and the rise in GDP. “Crucial in this situation of high debts – underlines the CSC – is to preserve the confidence regained by Italy in the financial markets. The interest rate on ten-year BTPs has fallen to historic lows (0.6% in March): a very favorable element of the scenario “. The public deficit is estimated to gradually decline but still high: 7.8% of GDP in 2021 and 4.8% in 2022, from the peak of 9.5% in 2020 linked to the fall in GDP and the measures taken to cope the pandemic crisis.


In the recovery of the economy expected for 2021, there will be a re-extension of the hours worked per capita; the number of people employed, on the other hand, is expected to continue to decline (-1.7%), after a limited decline of -2.8% in 2020 (770,000 fewer employees in the fourth quarter of 2020 compared to the end of 2019). In 2022, the second year of growth in GDP, there will also be room for a recovery in the number of employees (+ 1.4%, equal to + 313 thousand units).


Italian exports, which fell sharply in 2020 (-13.8%), will rise by 11.4% in 2021 and 6.8% in 2022, supported by the recovery in world demand, predicts the Confindustria Study Center. Sales of goods abroad are expected to recover as early as 2021, thanks to the rebound in EU and US demand; those of services, on the other hand, weighed down by the tourism crisis, are expected to close the gap only at the end of the two-year period, regaining momentum with the exit from the pandemic emergency in the world.


After the large loss in 2020 (-9.1%), investments are expected to increase at a rapid pace. In 2021 by + 9.2%, even if a large part of the recovery has already been ‘acquired’ in the second half of 2020. In 2022, beyond the pre-Covid values ​​(+ 9.7%), thanks to the better international context. Private investments will be held back by the “emergency” debt of companies: according to a Csc econometric simulation, an extension of debt repayment would have a positive impact on GDP of + 0.3% in 2021 and + 0.2% in 2022. The recovery of investments will be supported by public ones, with annual increases of + 19% in 2021-2022, up to 3.6% of GDP. The restart of the Italian economy, according to the CSC, is complicated by the sharp rise in the price of raw materials, which was accentuated at the beginning of 2021, which concerns metals and food, as well as oil. While some of these increases are expected to be temporary in perspective, they will put downward pressure on the margins of Italian companies and their cash flow in 2021, which adds to the problem of sales already compressed in 2020.


The burden of companies’ emergency debt can have a “negative impact” on investments, “it is therefore necessary to gradually review policies. In addition to lengthening the repayment period of debts, in the long term it is necessary to support the rebalancing of the financial structure of companies, with the promotion of alternative financing channels, in particular those of share capital “. Italian companies, which had strengthened their assets before the crisis, made a massive use of ’emergency’ loans in 2020, as happened in the other main European countries. The policy instrument most used in Europe is the public guarantee for bank loans, but other measures play an important role: in Italy, the moratorium on pre-existing loans, especially for SMEs; in Germany, various measures for the capitalization of companies, which allowed a decrease in loans already in the second half of 2020. The debt burden, measured in years of cash flow needed to repay it, rose just over 2 years in Germany and almost 7 in Italy and France.


It is necessary “to translate the National Recovery and Resilience Plan into actions and investments, and the reform projects into measures implemented, to equip the country with public administration and the quality of public goods essential for an advanced economy”, writes the CSC in the Report of forecast. “It is necessary to unleash the enormous potential of some sectors, such as tourism, which suffered more than others in the pandemic and which have all the characteristics to contribute to the sustainable development of the country”, he adds.


Spending by Italian households remains, even in the two-year forecast, the weakest component of domestic demand. It is expected to recover by 3.6% in 2021 and 4.6% in 2022, after the 10.7% contraction recorded last year. The increase in the two-year period will therefore not be sufficient to compensate for the sharp decline in 2020: by 2022 the distance compared to 2019 will still be 3.2%, equal to about 34 billion euros less. The extent and speed of recovery of consumption, in this particular historical phase, mainly depend on three factors: the distribution of the vaccine and its ability to contain Covid, which has a decisive effect on expectations; the extent and composition of the excess savings; the recovery of the labor market. As for the savings accumulated by households, according to Csc estimates there is currently an excess of “forced” savings that amounts to about 26 billion euros. This saving, which was induced by the closure of some activities in the services and by the limitations to the movement of individuals, represents a resource that can be spent (at least in part) when the definitive solution to the health crisis begins to be seen and expectations improve.


“A long-term strategy requires closer cooperation between public and private actors operating in the sector”. Thus the CSC on the tourism sector in Italy brought to its knees by the economic crisis triggered by Covid. “The sectors most affected by the crisis are those most connected with tourist presences. In 2020, world tourist arrivals fell by three quarters, generating losses equal to 2% of global GDP and putting 100 million jobs at risk. are the weakest categories: young people and women, less skilled workers, micro or small businesses. Italy has a historic tourism specialization. The sector, through links with other sectors, is worth 13% of GDP and 14% of employment “, reads the CSC report. “Italy excels in art and culture, but is lagging behind in transport and digital infrastructures and in the ability of governments to define priorities in tourism, linked to the promotion of the Italian brand and the attractiveness of the country abroad” , it adds.


The new rules impose severe restrictions on the entry of EU workers and students to Great Britain. This will have significant consequences: the United Kingdom, in the last five years, has been the first destination for Italians who have moved abroad. Looking ahead, it is the top professions that will be increasingly requested by the English market. Thus the CSC on Brexit. The trade and cooperation agreement between the EU and the UK has a historic task: to redefine relations between the Union and a former member country. The economic effects will be profound, given the ties between the EU and the UK. For Italy, commercial connections are stronger in the machinery, fashion and food and beverage sectors. Furthermore, direct links are deep, in terms of the presence of multinational companies and integration into global value chains.


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