Italy post-virus recovery on track with strong GDP growth

Italy’s gross domestic product (GDP) rose by a higher-than-expected 2.6 per cent between July and September compared to the previous quarter, official data showed Friday.

On an annual basis, GDP in the eurozone’s third largest economy was up by 3.8 per cent, national statistics agency Istat said in a first estimate that could be later revised.

“This brings Italy’s economy to 1.4 per cent below its pre-pandemic level -- a much fuller recovery than we have seen in Spain, for example, where third quarter GDP was still trailing over six percent below its pre-pandemic level,” economist Andrew Kenningham at Capital Economics said in a note.

In common with the rest of the eurozone, Istat also reported a surge in year-on-year inflation. 

In October, Italian prices rose by 2.7 per cent on an annual basis. That compared to 2.5 per cent in the previous months and a drop of 0.3 per cent in October 2020. 

Italy is rebounding strongly after a devastating recession in 2020, brought about by coronavirus, which saw output slump by 8.9 per cent. 

Istat said the economy was enjoying “very strong growth”, driven in the third quarter by services, industry, exports and rising internal demand. 

The agency noted that on current trends, Italy is set to achieve full-year GDP growth of more than six percent in 2021 -- an estimate that tallies with other bullish forecasts. 

Lorenzo Codogno, economist at LC Macro Advisors, called Rome’s latest national GDP data “extraordinarily robust” and predicted overall growth of 6.6 percent for this year.

According to Renato Brunetta, minister for public administration, the economy could continue to outperform in 2022, with growth “above five percent”, beating the current government target of 4.7 per cent. 

Prime Minister Mario Draghi’s government is hoping to provide added stimulus to the economy with an

expansionary budget for next year, unveiled late Thursday after its cabinet adoption.

The draft package, still subject to amendments and final approval by

parliament, includes 12 billion euros ($14 billion) of tax cuts, more than the eight billion euros announced last week.

Italy also stands to benefit as the main beneficiary of the EU’s massive coronavirus recovery fund, with 191.5 billion euros in loans and grants set to come from Brussels over the 2021-2026 period.