Italy was the first European country to be affected by the pandemic. The health emergency has required the adoption of unprecedented prevention measures based on social distancing, which are limiting the spread of the pandemic but only at a very high economic cost. In some sectors, such as tourism and catering, retail trade, transport and logistics, activity has shrivelled to almost nothing.
According to estimates produced using the PBO’s short-term forecasting models, Italy’s GDP contracted by about five percentage points in the last quarter. The reopening of economic activity, starting in May, will necessarily be gradual, so in the second quarter the quarter-on-quarter decline in output is expected to be even more pronounced, on the order of ten per cent. Assuming that no new wave of the pandemic emerges in the coming months, the recovery of the Italian economy should begin to manifest in the third quarter. These forecasts are surrounded by unprecedented uncertainty, which can be mitigated by economic policy. The Italian government has implemented initial response measures aimed at supporting households and firms, sustaining employment, disposable income and easing lending conditions.
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