Italy was the first country in Europe that was severely hit by the Covid-19 pandemic and the first European country to impose a strict lockdown. The lockdown of the economy was especially strict. As elsewhere, travel, tourism, hospitality, entertainment and many other sectors of the economy were hard hit. Since forecasts or scenarios are associated with very high levels of uncertainty at the moment, I do not publish a detailed economic forecast. After the Italian economy shrank by 5.3 percent in the first quarter of the current year, the slump in economic performance has probably been much more pronounced in the second quarter. I am relatively optimistic as regards the partial short-term recovery in the summer and autumn, but relatively pessimistic as to economic developments in the coming years (I also hold this view for several other countries). What one can say is that the economic recovery has started and will continue during this summer. Expansionary fiscal and monetary policies support the recovery. However, unemployment, liquidity problems, bankruptcies, and uncertainty will dampen the economic rebound. For the whole year of 2020, I expect a severe contraction of the economy of perhaps 11 to 13 percent. This will be followed by a strong, but somewhat weaker rebound than in other countries of around 7 percent in 2021. In a more dramatic scenario (for instance, if there is a second wave of the pandemic), the contraction in 2020 will be at around 16 percent. As I mentioned above, such forecasts are obviously associated with a high degree of uncertainty. Especially, there is the risk of a second wave of the pandemic. At the global scale, worldwide tensions could increase – especially between the United States and China. And at the European level, it is still not clear how exactly Brexit will occur and whether it will cause damage to the Italian economy – at least in the short term.
While I use several models in my forecasts, my published numbers are also strongly influenced by my personal experience and judgment.
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