A Glimpse of Italy’s Grim Trade-Off Between Death and Growth
A graffiti artwork depicting Vespa riders wearing protective face masks sits on a building leading to the Colosseum during coronavirus lockdown on Easter weekend in Rome, Italy. (Photographer: Giulio Napolitano/Bloomberg)

A Glimpse of Italy’s Grim Trade-Off Between Death and Growth

(Bloomberg) --

As Italian Prime Minister Giuseppe Conte weighs the choice between further virus deaths and a crippling economic slump, a study of the worst-hit regions shows what the costs may be.

A gradual reopening of the economy, starting with younger workers in industries designated as less risky for spreading infection, may limit additional deaths to about 5,000 over a year in Lombardy, compared with about 40,000 fatalities if the lockdown is lifted entirely.

Those scenarios are detailed in a study by some Italian economists published this week as the premier approached a decision on how to loosen restrictions on the country’s businesses and its 60 million people.

The number of lives at stake in the Lombardy region around Milan, Italy’s economic heartland and its hardest-hit area, was tallied by academics led by Bocconi University’s Carlo Favero in a report which may inform officials’ thinking. A full reopening would mean no further loss in gross domestic product but would cost more than 40,000 lives. Keeping the lockdown in full force would drastically reduce fatalities, but risks a 26% drop in GDP in the next year.

The report illustrates the horrific choices faced by Conte and leaders everywhere making similar political decisions. Any lockdown loosening is likely to mean more deaths, and Italy has suffered more than 25,000 virus-linked fatalities in the last two months alone.

The study, by Favero, Andrea Ichino of the University of Bologna and Aldo Rustichini from the University of Minnesota, presents four scenarios for Lombardy and the neighboring region of Veneto that put sobering numbers to the kind of trade-offs policy makers face.

1-Year Scenario for Lombardy

GDP LossFatalities
Full reopening0%41,446
Young workers (aged 20-49)9.4%5,237
Workers of all ages return in low-risk areas10.4%4,104
Mix of young in high-risk areas, others elsewhere14.8%3,246
Full lockdown staying in place26%2,420

The economic impact of the pandemic, and the number of fatalities can be contained with “prudent policies of gradual return to work,” Favero said in an interview.

A gradual reopening of less risky sectors in Lombardy, with only younger workers allowed to return, would increase fatalities by less than 1,000 and limit the economic impact, the researchers said. They propose a strategy that differentiates economic sectors and age groups.

GDP could fall between 10% and 15%, with fatalities hovering between 4,000 and 5,000, in scenarios featuring gradual reopening. Lower-risk sectors include agriculture and some manufacturing, while air transport and restaurants are among the most dangerous areas, according to a draft by the panel headed by Vittorio Colao, former chief executive officer of Vodafone Group Plc, which is helping Conte on the so-called “phase two” plan.

Companies in the manufacturing, automotive and construction industries will be the first to restart activities, Deputy Health Minister Pierpaolo Sileri said Thursday.

The government is trying to save an economy that was already trailing its peers before the epidemic and where GDP is seen falling 8% this year, according to government estimates. Conte on Tuesday pledged new economic stimulus worth at least 50 billion euros ($54 billion). His government approved an initial 25-billion euro package last month.

©2020 Bloomberg L.P.

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