Italy’s economy performed poorly in 2019 and is expected to worsen later this year due to the coronavirus, with the threat of an impending recession, experts said on Monday.
“In the best scenario for Italy, we expect zero growth (in 2020), with a negative first quarter, followed by a slow recovery,” said OECD chief economist Laurence Boone.
The economy expanded last year by just 0.3% – its worst value since 2014, when growth in gross domestic product (GDP) was zero.
Europe has done poorly recently, pressured by protectionist threats from Brexit and U.S. President Donald Trump.
But Italy, the eurozone’s third-largest economy, lagged far behind the bloc’s 1.2% growth.
The economy is traditionally export-oriented and has been hit hard by global trade tensions, political uncertainty at home – two general elections in two years – and a slowdown in Europe, particularly in Germany.
Prime Minister Giuseppe Conte’s government received good news – the public deficit fell to 1.6% of GDP last year, from 2.2% in 2018, while the debt index at least remained stable at 134.8%, well above the EU limit of 60%.
– Recovery of virus sinks –
But just as Italy had expected a gradual improvement in growth and debt, the coronavirus epidemic has occurred.
The country is the hardest hit in Europe, with 1,694 positive cases and 34 deaths, one of the biggest outbreaks outside Asia, according to data published Sunday.
Rich Lombardy and Veneto, regions that represent about 30% of Italy’s GDP, were hardest hit – with 11 cities among them forced to close in an attempt to contain the virus.
The government initially expected growth of 0.6% in 2020, while the European Commission predicted 0.5%.
But that was before the virus disrupted manufacturing, travel and tourism supply chains, with airlines cutting flights to northern Italy, postponed fairs, canceled sporting events and employees forced to work from home.
“After Italian GDP contracted sharply in the fourth quarter of last year, the coronavirus outbreak indicates the almost certainty of a renewed contraction in the first quarter that would leave Italy in a new recession,” says Nicola Nobile, an expert at Oxford Economics.
Milan’s FTSE Mib initially fell more than 3.0% on Monday, with anxiety about the virus continuing unabated.
With companies calling for help, Italy’s Economy Minister Roberto Gualtieri announced a € 3.6 billion support package – equivalent to 0.2% of the country’s GDP – to help the economy weather the storm.