June 5, 2020 / 1:17 PM / a month ago

Italy GDP to fall 9.2% this year, says central bank

ROME, June 5 (Reuters) - The Italian economy, brought to its knees by the coronavirus, will contract by around 9.2% this year, the Bank of Italy said on Friday, revising down a forecast of -9.0% 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 May 15 projection.

A decline in foreign and domestic demand and the drop in international tourism will all contribute to the steep GDP fall this year, the bank said.

The tapering of government lockdown measures to contain the virus epidemic will allow a pick-up in growth over the second half of this year, it added, only partly making up for the devastating hit to growth in the first and second quarters.

The first quarter saw a GDP drop of 5.3% from the previous three months, national statistics bureau ISTAT reported last week, the steepest quarterly decline since the current series began in 1995.

The Treasury has forecast a much larger quarterly drop of 10.5% in the in the second quarter, which has been more heavily affected by the lockdown that shuttered for most of April all businesses not deemed essential to the supply chain.

The economic contraction would have been even steeper this year but for government stimulus measures, which will contribute at least 2 percentage points to overall GDP, the Bank of Italy said.

It forecast that Italian consumer prices, measured by the EU-harmomised HICP index, will decline by 0.1% this year and be unchanged in 2021, “reflecting the fall in oil prices as well as the sharp decline in capacity utilization.”

Employment levels will shrink this year by 3.9%, it forecast, while the jobless rate will average 10.6%.

Some 274,000 jobs were lost in April alone, ISTAT reported on Wednesday, but the unemployment rate plummeted to 6.3%, the lowest for more than 12 years, as people stopped looking for work due to the coronavirus emergency. (Reporting By Gavin Jones)

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