“ In the first quarter of 2021 , machine tool orders for Italian manufacturers started increasing again .”
According to the Executive Board of the International Monetary Fund ( IMF ), which concluded the Article IV consultation with Italy on 26 May 2021 , the COVID-19 pandemic dealt a severe blow to the Italian people and their economy . GDP fell by nearly nine per cent in 2020 , with much larger drops for contact-intensive services .
“ Prompt and decisive policy responses by the Italian authorities , together with coordinated fiscal and monetary responses at the European level , were introduced to cushion the economic impact . A large fiscal expansion delivered income lifelines to households and firms , while extensive liquidity support was also provided , including through debt service moratoria and government-guaranteed credits . A ban on layoffs was introduced . These measures helped to preserve the structure of the economy but may be concealing the extent of underlying weakness in firms ’ financial health , labour market slack and loan quality ,” commented the IMF .
“ Italy ’ s economic outlook depends on the path of the pandemic , the extent of structural change it will usher in and the effectiveness of economic and public health policies . The recovery will be supported by the ongoing vaccination campaign and substantial investment spending under the government ’ s multi-year National Recovery and Resilience Plan ( NRRP ), mainly financed by Next Generation EU resources , to increase physical and social infrastructure and support structural reforms ,” continued the IMF .
Many of Italy ’ s structural challenges - the significant divides across regions , age , gender and productivity , as well as high levels of public debt - have been compounded by the COVID-19 crisis
Economic forecasts
ITALY IN FOCUS
We chart Italy ’ s path through the pandemic and highlight forecasts and growth projections for its economy and manufacturers .
“ GDP is expected to rebound by about 4¼ per cent in 2021 , while increased investment spending would keep growth well above the previous trend for the next several years . Nonetheless , long-run economic scarring could be sizeable . Risks relate in the near term to the speed at which the virus is defeated and the extent of savings drawdown and , over the longer term , to preserving favourable financial conditions , adequacy of NRRP implementation and maintaining the political momentum for structural reforms . Materialisation of these longer-term risks could exacerbate the already high public debt vulnerabilities ,” added the IMF .
IMF Executive Directors commended the Italian and European authorities for their strong and decisive policies that cushioned the social and economic impact of the pandemic . They noted that a robust recovery is expected in 2021 supported by ongoing vaccinations , although uncertainty remains . Continued policy support will be necessary until the recovery takes hold . Prompt and effective implementation of structural reforms will also be critical to support investment under the National Recovery and Resilience Plan to boost potential growth and foster a green , digital and more inclusive economy .
According to the OECD ’ s economic summary forecast ( May 2021 ) for Italy , growth was expected to rise to 4.5 % in 2021 as the vaccine rollout accelerates and remains strong at 4.4 % in 2022 .
“ Additional fiscal policy support will boost growth in the second half of 2021 and preserve productive capacity but will also raise public debt levels . Faster global growth will support the rebound in manufacturing , exports and investment , the latter also benefiting from higher public investment . Consumption will recover as mobility restrictions are lifted