Economic Bulletin No. 1 - 2021

The new pandemic wave curbs global recovery, but vaccinations have begun

The resurgence of coronavirus cases in the autumn led to a slowdown in global economic activity at the end of 2020. The start of the vaccination campaigns is affecting the medium-term prospects favourably, but the timing and intensity of the recovery remain uncertain. In the euro area the ECB Governing Council has expanded and prolonged monetary stimulus to ensure favourable lending conditions; it stands ready to recalibrate its instruments once again if necessary.

In Italy, a marked recovery in GDP is followed by a drop at the end of 2020

After performing better than expected in the third quarter, economic activity in Italy decreased in the fourth quarter. Based on the available indicators, this decline can currently be estimated at around -3.5 per cent, although there is a great deal of uncertainty over this figure. The downturn was considerable in services and marginal in manufacturing. Our surveys reveal that firms intend to step up their investment plans for 2021. According to the households interviewed by the Bank of Italy, spending on services continues to be held back by fears of infection more than by the restrictive measures

Lending continues to grow at a sustained pace

The optimism of financial market operators in Italy and abroad has been boosted by the announcement of the rollout of vaccines, though the markets nevertheless remain sensitive to the course of the pandemic. Italy's banks continued to meet demand for funds from firms. Supply conditions remained relaxed overall, thanks to the continuing support of monetary policy and public guarantees.

Robust growth is expected from the spring of this year, but persistently high risks must be countered

This Bulletin updates the macroeconomic projections for the Italian economy. Assuming that the pandemic gradually comes under control and that the substantial support from monetary and fiscal policy continues, it is expected that GDP will return to significant growth starting in the spring. Achieving sustained GDP growth depends, however, on the expansionary effects of the interventions under NGEU being deployed in full, on support measures preventing firms' rising indebtedness from having repercussions on financial stability, and on contagion fears not deepening again. Growth could instead be higher if faster progress were to be made in limiting the spread of the coronavirus.