Bank of Italy Sees Economy Shrinking Between 9%-13% in 2020

(Bloomberg) -- Italy’s economy could shrink between 9.2% and 13.1% this year, and rebound only modestly in 2021, the country’s central bank said Friday.

The Bank of Italy’s baseline scenario assumes that the pandemic will be kept under control and that containment measures will continue to be gradually removed, and is optimistic when compared to economist forecasts. The more pessimistic scenario envisages new outbreaks of coronavirus with consequent lockdowns that would damage the economy.

Last month, the central bank had estimated GDP would fall 9% as baseline scenario. Output is seen picking up by 4.8% next year.

“This year’s trend is the result of a decline in foreign demand and international tourism and of a drop in domestic demand,” the central bank said in the report.

The 2020 projection compares with the median forecast of economists for a 10.3% drop in output. Capital Economics has the most pessimistic outlook, at minus 18%, but others, including Unicredit and Morgan Stanley see slumps of about 15%.

The Italian government has passed two fiscal stimulus packages since March worth a total 75 billion euros to support businesses and workers damaged by the pandemic. The Bank of Italy said that measures to support domestic demand will contribute more than 2 percentage points to GDP, helping to limit the expected drop.

©2020 Bloomberg L.P.