By Edoardo Secchi, CEO of Italy-France Group.
“The Italian government met earlier this week and announced the immediate closure of Italian schools and universities until mid-March pending further study on the course of the infection. It was a decision to contain the spread of the virus that initially struck Lombardy, then spread to the regions of Veneto and Emilia-Romagna. As in wartime, Italy is experiencing a double shock for its economy: shops, cinemas and theaters are half empty. Tourism, public enterprises and transport have stopped – or almost stopped – and factories have to deal with absent employees and difficulties in managing their stocks, supply chains being interrupted. The government has promised aid measures to all affected sectors, with a total envelope of 3.6 billion euros. A tax credit should therefore be granted to those who have lost more than 25% of their turnover.
For several weeks, the engine of the Italian economy has been idling. Lombardy, Veneto and Emilia-Romagna represent 40.1% of national GDP and 50% of total exports. Together with the Piedmont and Liguria regions, they account for half of the GDP and tax revenue. As a result, the entire economy of the country risks paying a very high price. According to forecasts, GDP could lose between 9 and 27 billion euros, a drop of 1% to 3%.
In Italy, the tourism sector weighs for 146 billion euros: a figure equal to 12% of GDP, generated by a chain of 216,000 accommodation establishments and 12,000 travel agencies. Confturismo estimates that between March 1 and the end of May the country should lose 31.6 million tourists, representing a shortfall of 7.4 billion euros.
Another sector to bear the brunt of this crisis: international trade. Sales outside the borders of the provinces affected by the coronavirus (Lodi, Cremona, Pavia, Bergamo, Milan, Monza, Sondrio, Padua, Venice, Treviso, Piacenza, Parma, Modena and Rimini) represent 138 billion euros on a volume of ‘total exports of 465 billion euros. The consequences for the world economy are unpredictable and could be very serious. The Organization for Economic Co-operation and Development (OECD) has already lowered global growth for 2020, previously estimated at 2.9%: the international body stresses that, if the epidemic were to last longer and more virulent, growth could be halved and stagnate at 1.5%.
According to the American rating agency Standard & Poor’s, growth in the euro zone will be 0.5%, against 1% expected. Germany will experience zero growth, while Italy could lose 0.3%. Also in Italy, 10% of companies risk bankruptcy if the blockade of economic activities is maintained.
