Italy’s economic context
In 2020 Italy’s economy was severely affected by the COVID-19 global crisis, in relation to the fact for which this country was the first in Europe to be influenced by the pandemic consequences.
IMF and GDP growths and losses in WEO’s view
The IMF (International Monetary Fund) estimated a GDP (gross domestic product) loss of 10.5% in 2020 after an output contracted by 18% in the first half of the year.
In fact, the rebound of construction and industrial contributions could not offset the loss of other sectors (especially services and tourism, which accounts for 13% of GDP alone), despite government support. In 2021, a substantial carryover effect should have underpined a GDP rebound of 5.2%, followed by further growth of 2.6% in 2022 (IMF’s October 2020 forecast), though the situation is still uncertain under the nowadays time of the pandemic and the tightening of containment measures in the last quarter of 2020.
In its most recent January 2021 update of the World Economic Outlook, the IMF has revised its GDP growth projections for Italy to 3% in 2021 and 3.6% in 2022 (representing a difference from October 2020 WEO( world economic outlook) projections of -2.2% and +1%, respectively).
Government revenues should benefit from the rebound in economic activity in 2021, so that the deficit is expected to decline to 3.4%. The historically-high debt-to-GDP ratio spiked to a worrying 161.8% in 2020, though it is set to slowly decline to about 156.6% in 2022, thanks to nominal GDP growth and more favourable interest expenditure.
Inflation stagnated in 2020 (0.1%) due to downward pressure from oil prices and private consumption, and should remain subdued in 2021 and 2022 (0.6% and 0.9%, respectively – IMF).
Main Indicators 2020 (e) 2021 (e) 2022 (e)
GDP (billions USD) 1.00 2.00 2.00
GDP (Constant Prices, Annual % Change) -10.6 3.0 3.6
GDP per Capita (USD) 30 35 36
General Government Balance (in % of GDP) -3.8 -3.4 -2.9
General Government Gross Debt (in % of GDP) 161.8 158.3 156.6
Inflation Rate (%) 0.1 0.6 0.9
Unemployment Rate (% of the Labour Force) 11.0 11.8 10.8
Current Account (billions USD) 59.64 63.21 68.59
Current Account (in % of GDP) 3.2 3.0 3.1
•Source: IMF – World Economic Outlook •Database: October 2020
•Note 1: (e) Estimated Data
•Note 2: The GDP growth projections for 2021 and 2022 (Constant Prices, Annual % Change) were updated by the IMF in January 2021
Agriculture and economics by 2020
Italy is one of the main agricultural players in the EU, being the biggest European producer of rice, fruits, vegetables and wine.
The agricultural sector represents 1.9% of Italian GDP and is reliant on the import of raw materials utilised in agricultural production due to the country’s limited natural resources (Italian imports of raw materials are responsible for more than 80% of the country’s energy). The country has 12.6 million grounds of agricultural land and its main crops include cereals (particularly wheat), corn, barley, rice and oats. Italy is also the first world producer of wine. In order to respond to the COVID-19-related crisis, the Italian government set up specific schemes for the agro-food sector allocating more than € 1.1 billion.
Nevertheless, in the second quarter of 2020 the primary sector recorded a 12.8% decrease compared to the previous quarter (Italian Council for Agricultural Research and Analysis of Agricultural Economics).