Economic Bulletin No. 2 - 2021

The global outlook improves but uncertainties remain over the short term
The ongoing vaccination campaigns and the Biden administration's fiscal stimulus have led to an improvement in the global outlook. In the short term, however, uncertainties remain about the course of the pandemic and its impact on the economy. In the euro area, the ECB Governing Council decided to step up securities purchases under the pandemic emergency purchase programme to prevent a premature rise in yields, which would not be justified by the current economic outlook.

Economic activity remains largely stable in Italy, following a reduction at the end of 2020
Economic activity remained virtually stable in the early months of this year: a stronger performance in industry was accompanied by the still weak performance of services. According to our surveys, firms are planning to resume investment in the remaining part of the year. The households interviewed by the Bank of Italy expect consumption to recover gradually, but the saving rate remains high.  

Inflation rises, but the core component and inflation expectations continue to be low
Developments in energy prices brought inflation back into positive territory. Nevertheless, price pressures are modest.

Financial and credit conditions have been kept relaxed
The upward pressure on Italian government securities yields has been countered by the decisions taken by the ECB Governing Council and by the reduction in the sovereign risk premium. Lending to firms continues to expand at a steady pace, reflecting above all continued strong demand for State-guaranteed loans.

The expansionary measures currently being drawn up can support growth
According to the leading forecasters, GDP could expand by more than 4 per cent in 2021, with a significant recovery in the second half of the year. A scenario of a return to sustained and long lasting growth is plausible, though not without risks; it assumes that support to the economy will continue and that the measures being introduced under the National Recovery and Resilience Plan will prove effective. The outlook hinges above all upon the progress in the vaccination campaign and on a downward trend in COVID-19 cases.