Economic Bulletin No. 3 - 2020

The effects of the pandemic continue to weigh on the global economy

The contraction in international trade worsened in April. In recent weeks, there have been signs of a recovery, but the risks are still significant. Since May, the epidemic has intensified in some emerging economies and in the United States. The expansionary measures have helped to ease the strains on the financial markets, which nevertheless remain sensitive to news about the spread of contagion.

The ECB Governing Council strengthens monetary stimulus

The ECB's Governing Council has strengthened its expansionary monetary policy stance by expanding the size and duration of the pandemic emergency purchase programme (PEPP), which will continue until the crisis is over.

In Italy signs of an upturn emerge in May, but the recovery is gradual

In Italy, the decline in GDP appears to have intensified in the second quarter and, based on the available information, currently stands at around 10 per cent. This estimate reflects the unfavourable performance in April; the short-term indicators suggest that economic activity began to recover in May.

Loans to firms increase

The measures adopted by the ECB and by the Government have supported credit to firms. In Italy, growth in loans to firms reached 11.5 per cent in May (at a three-month annualized rate). The expansion in lending extended to producer households, following the steady reduction in the delays in implementing the measures adopted by the Government.

Economic activity is expected to return to growth in the second half of the year

This Bulletin provides an update of the scenario analyses for the Italian economy. In a baseline scenario, which assumes that the spread of the pandemic remains under control, GDP will shrink by 9.5 per cent on average this year and is expected to gradually recover over the next two years (4.8 per cent in 2021 and 2.4 per cent in 2022). Should there be any new and serious outbreaks at national or global level, developments could be more negative.

European initiatives could favour growth

Growth prospects could improve as a result of the strengthening of the expansionary policies currently under discussion. The approval and the effective use of the instruments being debated within the European Union could have a direct impact on demand, production capacity and the confidence of households and firms. The amount of resources that may be granted will depend on the capacity to propose and implement reforms and sound investment projects.