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02 June

News Analysis: Most expect Italy's economy to rebound later this year, but few agree on how much

News Analysis: Most expect Italy's economy to rebound later this year, but few agree on how much


Consensus estimates are that in the second half of this year Italy's economy will gain back some of the losses it experienced during the national coronavirus lockdown. But there is little consensus on how much.

Italy's National Statistics Institute, best known as ISTAT, revised its estimates for the first quarter of this year, saying the economy contracted by 5.3 percent compared to the last quarter of 2019, weaker than earlier estimates of a 4.7-percent contraction. During the quarter, imports decreased by 6.2 percent and export by 8.0 percent. Agriculture was 1.9-percent lower and industrial output was down by 8.4 percent.
Given that Italy's lockdown entered into force in early March -- near the end of the first quarter -- all estimates are that the contraction will be even larger when second-quarter economic data is released next month.

But after that? Opinions vary.

Ignazio Visco, the governor of the Central Reserve Bank of Italy, predicted Italy's economy would shrink between 9 and 13 percent for the year as a whole. Though the 4-percentage-point range is large -- usually, near-term economic prognostications only vary by a few tenths of a percent -- the more optimistic side of the range would almost certainly require positive growth over the second half of the year.

Most economists, investment banks, and multilateral groups fall into a similar range as the one in the latest Central Reserve Bank, from negative 9 to negative 15-percent growth for 2020 compared to 2019.

"I am expecting economic weakness in Italy to last well into next year and perhaps into 2022," Javier Noriega, an economist with investment bankers Hildebrandt and Ferrar, told Xinhua. "The tourism sector won't be back on its feet this year, and exports will depend on the economic recovery in other countries. The recovery will be soft, but we have no way to accurately estimate how soft."

Alessandro Polli, a professor of economic statistics at Rome's La Sapienza University, agreed about the insufficient data to accurately model the medium-term impact and severity of the economic slowdown. But he was more optimistic about where things could be heading.

"Any economic growth estimates we see now are the equivalent of shooting in the dark," Polli said in an interview. "We are just guessing; we just don't have the data on unemployment levels, exports, industrial production, tourist arrivals. It's not really in our own hands, because internal consumption in Italy is too weak to sustain the economy. We're too dependent on what happens elsewhere."

But Polli's personal prediction is more optimistic than those of many other economists.

"My impression is that this lockdown will look like an economic parenthesis," he said. "Does that parenthesis last three months? Six months? A year? We have to wait to know that. But I think there is pent-up demand. The economy was not powerful before the arrival of the coronavirus but I think we will get back to semi-normal levels fairly quickly."

TV BRICS reports with reference to Xinhua News Agency.

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