Daily Management Review

Coronavirus Related Curbs In Italy Could Hit Its Already Weak Economy Hard


Coronavirus Related Curbs In Italy Could Hit Its Already Weak Economy Hard
Italians have been directed to stay back home and venture out only for emergencies or essential work-related purposes in order to prevent the spread of the virus even as the most strict curbs in whole of Europe have been imposed in the country so far.
The government has also directed closure of all bars, restaurants, schools, universities, museums, sports centres and all retailers except t for those selling medicines and food shops all across the country. And individual residents have been asked to keep a distance of one meter form each other both outdoor and indoor.
But this is set to have a huge toll on the country’s economy because the almost 4 million people are employed in the retail and wholesale sector which is about 15 per cent of all the jobs in the country. this sector also accounts for about 12 per cent of the gross domestic product of Italy.
The already weak economy of Italy is most likely to be hit by the strictest controls on personal movement imposed there since the Second World War even though it is hard to enforce them throughout the country. According to experts, these curbs will add on to the already disrupted supply chain and hit companies with a demand shock that will make small businesses most vulnerable and could push the Italian economy into a recession.
According to expectations of the UBS, the Italian economy is poised to contract in the current year by 0.4 per cent, or by 0.8 per cent in a “negative scenario” which is in contrast to its earlier prediction of the economy clocking a growth of 0.3 per cent this year.
Analysts now fear that the rate at which the coronavirus is spreading to some parts of Europe could soon require the same level of economically-damaging curbs that have been imposed in Italy being imposed in some other countries of the eurozone.
“We are talking about bad, very bad or crisis scenarios,” said one eurozone policymaker while talking to the media. “We have moved into the very bad [scenario].”
It is the hope of the Italian government that as soon as people can be allowed to move around for work, it would help to save the economy form coming to a complete halt. However the curbs that are currently in force in the country could hit the many small companies in the services sector, and particularly in the tourism industry, very hard. Such companies account for almost 6 per cent of the GDP of the country. The accommodation and food services in Italy employs about 1.7 million people and according to estimates of Capital Economics, these sectors could be hit with  a 75 per cent drop in output because of the nationwide quarantine.
“It is the services industry that is being completely crushed,” said Brunello Rosa, chief executive of Rosa & Roubini Associates, a consultancy. “Imagine restaurants, cinemas, any sort of personal service. This [consumption] is not postponed but lost.”