ROME: Italy faces a “formidable” challenge as it tries to fix its long-ailing economy with the help of EU post-pandemic recovery funds, central bank governor Ignazio Visco warned on Monday.
The eurozone’s third-largest economy is due to receive a huge bonanza of loans and grants worth 191.5 billion euros ($233.5 billion) over the 2021-2026 period, and its government has pledged a raft of reforms to put them to good use.
The EU-funded national recovery plan “must be part of a collective effort, aimed at overcoming Italy’s structural weaknesses and the specific factors of the anaemic economic growth of the last two decades,” Visco said. “The opportunities Italy will be able to offer future generations depend on the success of the reforms and measures of the National Recovery and Resilience Plan,” the governor stressed.
“It is a formidable challenge.” Visco, delivering his annual speech on the state of the economy, also warned that Italy could not afford to maintain the economic support measures introduced to soften the impact of the current recession. “A future built on public subsidies and incentives is unthinkable,” he said, noting that public debt, standing at around 160 percent of gross domestic product (GDP), has reached the highest level since the end of World War I.
However, “the support measures for households and firms must be withdrawn gradually and only when the economic situation has been sufficiently consolidated and uncertainty significantly reduced,” the governor said.
Italy has long been the EU’s growth laggard. As the first country in Europe to be hit by the coronavirus pandemic, gross domestic product plunged last year by almost 9 percent, triggering the worst slump in its postwar era.
Visco said that as the country continues to make progress with vaccinations and reopenings of the economy, he expected an accelerated recovery, with GDP expanding by more than four percent in 2021.
His expectations are broadly in line with government forecasts of annual GDP growth of 4.5 percent this year and 4.8 per cent in 2022, although Prime Minister Mario Draghi said earlier this month that they could be revised upwards. After months of lockdown gloom, delays in vaccinations and a persistently high number of virus fatalities, things have started to look up in Italy, just in time for the onset of the summer season.
On Sunday, the country recorded 44 Covid-19 deaths, the lowest daily tally in more than seven months, while the government said 20 percent of the population had been fully vaccinated.