Italy: Economic outline
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Italy's economy was heavily impacted by the global financial crisis and only emerged from recession in 2015; however, the country was one of the most affected by the COVID-19-induced crisis. After losing almost 9% in 2020, Italy’s GDP rebounded by an estimated 5.8% in 2021, on the back of private consumption and higher investments. The Italian economy is expected to embark on a stable and sustained expansion path this year (+4.2%), thanks to investments financed by EU’s Recovery and Resilience Facility (RRF), the easing of supply shortages, and an expansive budgetary policy. For 2023, the IMF forecasts a growth of 1.6% (2.3% according to the European Commission), a rate still sizeably higher than Italy’s long-term average.
The country’s primary budget (which excludes interest payments) is structurally positive; however, the interest cost on the government’s debt weighs heavily on Italy’s accounts, with the general government budget being structurally in deficit. This trend was exacerbated by the COVID-19-induced crisis (estimated at 4% of GDP in 2021 by the European Commission), which prompted a reduction in revenues from both direct and indirect taxes, as well as by increased government expenditure. Overall, the general government balance was negative by 7.1%. The global recovery and the phasing-out of COVID-related support measures should favour a gradual decrease of the deficit over the forecast horizon (3.8% this year and 3.3% in 2023 - IMF). The historically-high debt-to-GDP ratio spiked by more than 20pp in 2020, decreasing only marginally in 2021 (154.8%). Interest expenditure is set to steadily decline as a share of GDP in light of favourable financing conditions, benefiting the debt-to-GDP ratio which is expected to be around 150%. Being a net importer of energy, Italy’s inflation was pushed by rising global energy costs over the course of 2021, with headline inflation above 1.7%. A similar rate should be recorded this year (1.8%) before the index starts to decrease in 2023 (1.2% - IMF).
The unemployment rate, which has been on the rise since the global financial crisis, started dropping in recent years; however, it spiked in the aftermath of the global pandemic crisis, reaching 10.3% in 2021. The end of pandemic-relief measures (including the general dismissal ban and job retention schemes for workers in the manufacturing and construction sector) are expected to cause a marginal increase of the unemployment rate this year (11.6%), before falling to 11.4% by 2023 (9.2% as per the EU Commission estimates), amid a gradual rise in labour supply. Italy has high levels of youth unemployment (29.8% as of Sept. 2021 according to ISTAT), and regional inequalities between the highly industrialised and dynamic North and the poorer, rural southern “Mezzogiorno” areas are still high. Furthermore, Italy has to face a falling birth rate and a declining population. Italy’s GDP per capita (PPP) was estimated at USD 43,376 by the IMF in 2021, just below the EU-27 average (Eurostat).
Main Indicators | 2019 | 2020 | 2021 (e) | 2022 (e) | 2023 (e) |
GDP (billions USD) | 2,005.14 | 1,884.94e | 2,120.23 | 2,272.27 | 2,369.65 |
GDP (Constant Prices, Annual % Change) | 0.3 | -8.9e | 6.2 | 3.8 | 2.2 |
GDP per Capita (USD) | 33,521e | 31,604e | 35,585 | 38,169 | 39,831 |
General Government Balance (in % of GDP) | -0.9 | -5.9e | -7.1 | -3.8 | -3.3 |
General Government Gross Debt (in % of GDP) | 134.6 | 155.8e | 154.8 | 150.4 | 149.4 |
Inflation Rate (%) | 0.6 | -0.1e | 1.7 | 1.8 | 1.2 |
Unemployment Rate (% of the Labour Force) | 10.0 | 9.3e | 10.3 | 11.6 | 11.4 |
Current Account (billions USD) | 64.28 | 66.86 | 78.82 | 80.83 | 84.24 |
Current Account (in % of GDP) | 3.2 | 3.5 | 3.7 | 3.6 | 3.6 |
Source: IMF – World Economic Outlook Database, 2016
Note: (e) Estimated Data
Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
Euro (EUR) - Average Annual Exchange Rate For 1 GHS | 0.24 | 0.20 | 0.18 | 0.17 | 0.16 |
Source: World Bank, 2015
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Latest Update: June 2022