Bank of Italy lowers 2020 GDP forecast to -9.5pc

ROME: The Italian economy, brought to its knees by the coronavirus, will contract by around 9.5% this year, the Bank of Italy said on Friday, revising down a forecast of -9.2% made last month.

It its latest economic projections the central bank forecast a partial rebound next year, when gross domestic product is seen rising by 4.8%, unchanged from its June 5 projection.

"The recovery will be gradual," the bank said, warning there would be "lasting effects on family consumption due to the decline in employment and disposable income."

The central bank estimated in its quarterly bulletin that gross domestic product fell around 10% in the second quarter from the previous three months, but said it would pick up to some extent over the second half of the year.

National statistics bureau ISTAT will publish preliminary second quarter GDP data on July 31. The first quarter registered a drop of 5.3% from the previous quarter, the steepest decline since ISTAT's current series began in 1995.

Industrial output rebounded much more strongly than expected in May after collapsing in the previous two months due to the coronavirus lockdown, ISTAT reported earlier on Friday. The economy minister forecast further gains in June and July.

The lockdown shuttered most firms during March and April, and was lifted in May.

The government of the anti-establishment 5-Star Movement and the centre-left Democratic Party officially forecasts a full-year 2020 GDP fall of 8%, though Economy Minister Roberto Gualtieri has said this will probably have to be revised down.

Italian banks lent a net 23 billion euros to non-financial businesses in the three months through May, the Bank of Italy bulletin said, pushing the lending growth rate to 11.5% compared with a contraction of 0.3% in February.

The credit expansion had been supported by government and European Central Bank measures, the bulletin said.