Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Italy just avoided a technical recession in Q1 2021 when the
economy grew by 0.1% q/q.
Looser regional COVID-19 restrictions will trigger stronger
economic growth in the second and third quarters.
Many consumer-facing services are enjoying improved trading
conditions since early May.
Real GDP is to expand by 4.7% in 2021 and 4.1% in 2022.
However, the upward revision to first quarter GDP developments
points to higher 2021 growth projection.
Italy avoided a technical recession in early 2021, which is
defined as two consecutive quarters of GDP contraction. The
national statistical office reports that the economy grew by 0.1%
quarter on quarter (q/q) in the first three months of the year,
compared to its first estimate of a 0.4% q/q drop.
The economy shrank by 1.8% q/q in the fourth quarter of 2020. In
annual terms, GDP fell by 0.8% year on year (y/y) in the first
quarter, after an 8.9% drop in the full year 2020. Consumer
spending shrank notably in the first quarter, with spending on
hospitality and leisure services impacted by households' fears of
infection risks and by the impact of the tight regional
restrictions.
Many regions have relaxed restrictions as new infections
continue to fall. The color categories are:
White zones: Bars and pubs can stay open until
21:00, while restaurants can serve until 23:00. The curfew begins
at 23.30 as opposed to elsewhere at 22:00.
Yellow zones: Restaurants, bars, and ice-cream
shops can serve customers at both lunch and dinner - but only at
outdoor tables, and businesses must close in time for the 22.00
curfew.
All schools and universities resume in-person teaching in yellow
and orange zones.
Cinemas and theatre shows will be allowed outdoors. Indoor
showings can also go ahead at 50% capacity.
All shops are open in yellow zones.
Orange zones: All shops are open, but malls are
closed on weekends and public holidays except for shops selling
essential goods. Restaurants and bars are closed except for
takeaway. People are not allowed to leave their towns except for
emergencies, work, and health reasons.
Red zones: Restaurants and bars are closed,
except for takeaways and deliveries, and all non-essential shops
are shut.
The main regions in the following color categories from
1 June:
Yellow zone: Abruzzo, Aosta Valley, Basilicata,
Calabria, Campania, Emilia Romagna, Lazio, Liguria, Lombardy,
Marche, Piedmont, Puglia, Sicily, Trentino-South Tyrol, Tuscany,
Umbria, and Veneto (57.2 million of Italy's total population of
60.4 million).
White zone: Friuli Venezia Giulia, Sardinia and
Molise (3.2 million).
Several factors point to stronger economic growth from
Q2
Italy is to enjoy stronger pick-up in activity in the second and
third quarters of 2021, with GDP growth expected to accelerate to
1.9% q/q and 2.3% q/q in the second and third quarters,
respectively. All regions moved from the red and orange zones to
the less restrictive yellow and white zones because of falling new
infections. Importantly, many consumer-facing services are enjoying
improved trading conditions since early May.
The IHS Markit PMI composite output index (manufacturing and
services) is in positive territory for a third successive month to
signal the continued recovery in Italy's private sector output
during May. Moreover, the latest reading signaled the quickest
expansion in private-sector output for over three years.
Indeed, May's PMI survey flagged that Italian manufacturing
activity continued its strong recovery path, with new orders and
output growth among the strongest in survey history. The same
survey signaled services' business activity rising for the first
time since July 2020 in May and at the quickest pace since March
2019. Reopening companies reported a surge in new business as
demand began to recover in line with easing COVID-19
restrictions.
Increased optimism from mid-2021 also reflects the COVID-19
vaccine rollout in Italy and elsewhere in Europe helping a partial
revival of tourism activity in Italy. This would provide a welcome
lift to the struggling hospitality, accommodation, and retail
sectors in the tourist hot spots.
The balance of risks is better balanced. Falling infection rates
have allowed looser containment measures, but this easing,
alongside the emergence of highly infectious variants, presents a
lingering risk.
The immediate growth outlook is partly dependent on the
continued logistical challenge of the unparalleled vaccination
program, which began on 27 December 2020.
Like elsewhere in Europe, Italy's vaccination campaign was
initially delayed due to vaccine shortages. However, the rollout
has gathered significant momentum, with Italy now hitting its
target of administering 500,000 COVID-19 vaccinations in a single
day.
As of 1 June, 23.9 million people in Italy had received at least
one dose of a COVID-19 vaccine, or around 40% of the population. In
addition, nearly 12.3 million people have been administered both
doses. Italy hopes 60% of the adult population will be vaccinated
by mid-July, with herd immunity of 80% cover forecast for the end
of September. According to our May forecast, we expect real GDP to
expand by 4.7% in 2021 and 4.1% in 2022. However, the upward
adjustment to first quarter GDP developments points to a further
upward revision to our 2021 growth projection in the June update,
probably to just above 5%.
Posted 15 June 2021 by Raj Badiani, Economics Director, Europe, IHS Markit