Italy central bank sharply raises 2021 growth forecast

Italy’s economy will grow more than previously expected this year, buoyed by EU-supported investment, the central bank said Friday.

The Bank of Italy said it expected gross domestic product (GDP) to rise by 4.4 percent, but warned its forecast did not take into account favourable economic data from last week.

Factoring in projections released by national statistics agency Istat on June 4, the estimate should be revised upwards by “more than half a percentage point”, a statement said.

For 2022 and 2023, the bank predicted growth of 4.5 percent and 2.3 percent, respectively.

Friday’s data was markedly more optimistic compared to January, when GDP was expected to expand by 3.5 percent in 2021, 3.8 percent in 2022 and 2.3 percent in 2023.

The recovery “is driven above all by investment” helped by growing confidence in the economy, low-interest rates, and the expected windfall of billions of euros from the European Union, the central bank said.

Italy was the first European nation to be hit by the Covid-19 pandemic and its economy contracted by a staggering 8.9 percent last year.

However, the economic outlook has recently turned sunnier, and the country is set to receive nearly 200 billion euros ($242 billion) from the EU’s massive post-pandemic recovery fund.

The money, covering the 2021-2026 period, is expected to be disbursed in instalments starting in the second half of the year.

The Bank of Italy said its forecast depended on continued progress with vaccinations, allowing the lifting of “most” coronavirus restrictions by the end of the year.

It also said its calculations banked on continued fiscal and monetary stimulus for the economy, and on “no significant delays” in recovery projects backed by national and EU funds.

Last week, Prime Minister Mario Draghi said Italy was “yearning to restart” and “facing a new phase” after “very tough” pandemic months.

In one of several signs of growing optimism for the eurozone’s third-largest economy, industrial production returned to pre-Covid levels in April, Istat data showed Thursday.