“A new lockdown? No, we have already ‘burned’ 160 billion of wealth”

Rome, October 17, 2020. In the rosiest forecasts, this year’s Italian GDP, or the wealth produced in the country, should drop by around 10 percent compared to 2019. Due to the negative effects of Covid, therefore, we risk “burning” 160 billion of GDP. To give an idea of ​​the size of the contraction, it is as if the Veneto had been in lockdown all year long. To say it is the CGIA. The study office coordinator Paolo Zabeo declares: “The gravity of the situation emerges even more clearly if we compare the current economic situation with what happened in 2009, dose horribilis of the post-war Italian economy. At that time, GDP fell by 5.5 percent and the unemployment rate, within 2 years, went from 6 to 12 percent. This year, on the other hand, if things go well, GDP will decrease by about 10 percent. With a collapse almost double that recorded 11 years ago, it is clear that such a vertical drop will have very negative effects on the labor market. This is why we say no to any generalized closure that would aggravate the situation even more. Also because the worst is yet to come. When the block on layoffs is lifted, in fact, we will run the risk of seeing the number of unemployed increase dramatically ”.

Faced with a crisis that requires us to relaunch domestic demand, the measures to be adopted are known to all: a drastic and structural reduction in taxes for households and businesses to restart both consumption and investments. Unfortunately, we have recently understood that the tax reform will only be introduced starting from 2022, while the investments to carry out the great works are linked to the resources made available by the Next Generation EU which, in the best of hypotheses, will arrive in the second half of 2021, taking effect only from the following year.

Secretary Renato Mason states: “In addition to having an unquestionably excessive tax burden, bureaucratic pressure that continues to penalize those who do business and a very worrying drop in investments, which particularly affects those of a public nature, there is another major criticality that risks putting many companies in serious difficulty, especially small ones. We refer to the new legislation introduced by the European Union that affects banks. To avoid the negative effects of non-performing loans, Brussels has imposed on them the cancellation of unsecured risk loans in 3 years and in 7-9 years for those with collateral. It is clear that the application of this measure, in essence, will induce many credit institutions to adopt an attitude of extreme prudence in disbursing loans, to avoid having to incur losses in a few years “.

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  • The forecasts show a collapse in household consumption of 96 billion

Consumption and investments, we said, are two levers on which we should act immediately to allow the country’s economic recovery. According to the NADEF (Update of the Document of Economics and Finance 2020), household consumption, which constitutes the most important component of the national GDP (about 60 percent of the total), will suffer a real collapse this year. In absolute terms, households will “save” 96 billion euros (- 8.9 percent compared to 2019). Basically, each Italian family will reduce spending by around 3,700 euros. It is clear that this contraction will especially penalize the world of VAT numbers. We remind you that artisans, small traders and freelancers work mainly for the domestic market and especially with Italian families. With this “squeeze” on consumption, even these independent businesses will suffer a major drop in turnover.

  • Investments down by 42 billion

Equally ruinous will be the reduction in public and private investments: again according to the NADEF, in 2020 they will suffer a reduction of 13 per cent which in absolute terms corresponds to 42 billion euros. Obviously, the state of uncertainty and mistrust that characterizes companies affects them negatively. This is why it is necessary to intervene as soon as possible, so that both the State and its peripheral joints accelerate the opening of the construction sites of the many public works necessary for the revival of the country. In this regard, we point out that the infrastructure annex to the National Reform Program presented on 6 July, provides for a priority investment plan for mobility1 of 196.7 billion euro of which 131.3 (equal to 66.7 per cent of the total) already available. Jobs that should start as soon as possible, however, are blocked either by the non-appointment of the commissioner or because they are muddied in the bureaucratic shackles tended by our Public Administration.

  • We are sliding towards deflation

With little liquidity and vertically falling consumption and investments, the country is slipping dangerously towards deflation. In fact, since last May, the consumer price index has always been negative. Given that this result is largely due to the fall in energy prices, deflation, we recall, manifests itself with a progressive decline in the prices of goods and services. At first glance, this may seem positive: if prices fall, consumers gain. In reality, things are different: despite the fact that prices are falling, families do not buy, because, due to lower financial resources and negative expectations, the little that is sold means, for retailers, increasingly narrow profit margins. The merchandise, remaining on the shelves and in the shop windows, determines a situation of difficulty for the merchants, but also for the manufacturing companies which, in the face of so much unsold, are forced to reduce production. All this initially gives rise to an increase in the use of layoffs which then leads to a sharp surge in layoffs. In short, a vicious circle is created that throws the country’s economy into despair. As we said above, also to overcome this situation it is necessary to inject high doses of liquidity into the economic system, providing credit to households, businesses and relaunching investments, especially public ones.

  • The official figures for the first 6 months are dramatic

In this first part of the year, the effects of Covid on the Italian economy were very heavy. Compared to the same period of 2019, in the first six months of this year almost all the main economic indicators of the country were preceded by a minus sign. In summary, we point out:

  • construction production …………. -24.2 per cent

(data referred to the first 5 months of the year);

  • industry orders ………………………… -20.9 per cent;
  • export of goods and services ……………………… -20.4 per cent;
  • industry turnover …………………………. -19.0 per cent;
  • industrial production ………………… ..- 18.3 per cent;
  • turnover from services ………………………. -16.9 per cent;
  • investments ………………………………… ..- 14.7 per cent;
  • household consumption ………………… ..- 11.9 per cent;
  • GDP …………………………………………………… -11.7 per cent;
  • Retail …………………. -8.8 percent.

The data reported in Tab. 1 (updated to 4 September last) also indicate that already in 2019 the economic situation of the country had been very difficult, especially as regards the indicators relating to the turnover of the industry (-0 , 3 per cent), industrial production (-1 per cent) and industrial orders (-1.9 per cent).

1 Investments in roads, highways, railways with urban nodes, rapid mass transport in metropolitan cities, ports and airports.

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