Bank of Italy: growth beyond expectations, + 6% in 2021

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October 22, 2021 The Italian economy continues to accelerate. The Bank of Italy also revises its estimates upwards and now expects GDP to grow "around 6% in 2021" against the + 5.1% estimated in July. In the third quarter, reports the Via Nazionale Economic Bulletin, the increase would have been over 2%, with the rebound sustained by the vaccination campaign and the return of mobility.

The increase in GDP, which was well above expectations in the spring months, says Bank of Italy, would have been more than 2 per cent in the third quarter as well. The extension of vaccination coverage and the increase in mobility have made it possible for families to resume consumption of services, alongside the recovery already underway in business investments. The improvement in the economic situation has translated into an increase in employment, especially in the term. According to the central institute, the increase in GDP should be around 6 percent in 2021, a value significantly higher than the + 5.1% estimated in the July Economic Bulletin. 

The cost of energy is driving inflation which reached 2.9% in September. However, notes Palazzo Koch, there are so far no signs of an acceleration in wages and businesses, despite having adjusted their price increases forecasts upwards, indicate increases of less than 2 per cent per year.

Industrial production, which has risen above pre-pandemic levels since June, slightly decreased in August (-0.2 per cent on the previous month). According to the Bank of Italy, the estimates for September allow us to forecast that in the third quarter it grew by approximately 1 per cent overall, in line with what was observed in the second.

The improvement in the economic situation translated in the spring into a marked increase in employment, especially at term, and in hours worked. Employment increased again in July and August, albeit at a slower pace. However, the effects of the pandemic crisis have not completely overcome and signs of underutilization remain: recourse to wage integration tools is still extensive, although much lower than the 2020 peaks, and the activity rate is below the levels of two years ago. 

Bank of Italy polls indicate that household expectations on the Italian economic situation have improved overall. The propensity to spend in the sectors most affected by the pandemic, including hotels, bars and restaurants, is also recovering. However, caution still remains with regard to spending prospects, especially among the less well-off households. Firms confirm very favorable judgments on the conditions for investing.

The most recent economic information points to a further strong expansion in consumption in the third quarter, favored by the easing of restrictions associated with progress in the vaccination campaign.

During the summer, the growth of loans to non-financial companies declined, following the smaller requests for financing by companies.

This lower demand was affected by both the abundant accumulated liquidity and the economic improvement, which translated into a recovery in cash flows.

Credit offer conditions remain relaxed.