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Bank of Italy: -9.5% GDP forecast for 2020

Bank of Italy: -9.5% GDP forecast for 2020

The Italian economy struggles for survival

One of the most battered economies in Europe, the Italian one, is looking for ways to emerge from the pandemic's economic disaster.

Last Tuesday, a package of measures made to cut the red tape – that people believe has crippled the economic growth – got the government's approval. “The mother of all reforms” will aid the reset of an economy affected by the Coronavirus. The legislation covers various sectors like digitalization, public tenders, guidance line for corporate capital increases, and criminal responsibility of public officials.

Although the measures came as a pandemic consequence, this is not the first attempt. In 2010, at that time, Minister for Simplification Roberto Calderoli made a bonfire out of 375,000 regulations that he got rid of.

The new decree eases assigning small-scale work projects, and simplifies procedures for up to $5.9 million projects. Also, the mayors' power to oppose the installation of 5G mobile infrastructure got limited. By the end of the year, the rule according to which a corporate business needs two-thirds of shareholders votes to pass capital increases got abolished.

Although Italy has marked a legislative victory, the same doesn't apply to the economic sector. On Friday, the Bank of Italy revised its forecast it made last month. The economy is to contract by 9.5% this year from a previous 9.2%. Still, the GDP projection remains the same for next year – a 4.8% rebound. In its bulletin, the bank stated that in the past quarter of this year, the GDP fell roughly by 10%.

However, the lending rate grew to 11.5% compared to the 0.3% contraction recorded in February. The increase was caused by the 23 billion EUR lent by the Italian banks to non-financial business until May, and by the European Central Bank measures.

After the bank's report, all eyes will be on the ISTAT data concerning the second-quarter GDP due July 31. The first quarter recorded a 5.3% decrease – the most dramatic since 1995 when ISTAT started.

Now, the Italian benchmark Italy40 is trading higher by almost 0.80%.

Read more about the most affected economies by the pandemic on CAPEX.com!

Sources: forexfactory.com, aljazeera.com, reuters.com

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