ROME, July 31 — Italy’s economy contracted by 12.4 per cent in the second quarter, the national statistics bureau Istat said today, as coronavirus lockdowns knocked the country’s output back to the level of a quarter century ago.
The plunge in quarter-on-quarter gross domestic product (GDP) took Italy — the eurozone’s third-largest economy — into recession as it had shrunk by 5.4 per cent in the first quarter.
A recession is commonly defined as two consecutive periods of a quarter-on-quarter drop in GDP.
Compared with the second quarter in 2019, GDP fell by 17.3 per cent, according to Istat’s first estimate.
“After the sharp contraction recorded in the first quarter, the Italian economy suffered an unprecedented contraction in the second quarter, as the health crisis and the containment measures adopted fully produced their negative economic effects,” Istat said.
It said the drop was “part of an international context in which the main economies are recording reductions of a similar magnitude due to the spread of the pandemic.”
The drop took the output of Italy’s economy all the way back to the level it recorded in the first quarter of 1995, Istat said.
Italy was the first European country to be hit by the pandemic, which has officially killed over 35,000 people in the country. A more than two-month lockdown begun in March severely crippled the country’s economy.
The Italian government plans to add €25 billion (RM125 billion) to the 2020 budget for employment and income support, which will bring the public deficit to 11.9 per cent of GDP, the highest in the eurozone.
That budget increase will raise Italy’s debt to 157.6 per cent of GDP.
In April, ratings agency Fitch cut its outlook on Italy’s sovereign debt to BBB- with a stable outlook, or one notch about “junk”. Moody’s did the same in October 2018, well before the pandemic. — AFP