ROM (Reuters) – The Italian economy will grow by almost 5% this year, the Bank of Italy announced on Friday, raising an earlier forecast due to the improving coronavirus situation and an upward revision in gross domestic product data for the first quarter.
The central bank’s latest forecast, which is part of a regular forecasting exercise coordinated by the European Central Bank, is above the latest estimate by the Italian government, which is forecasting 4.5% growth in April.
The Bank of Italy said growth would decline to 4.5% next year, slightly below the government’s forecast of 4.8%.
In both years, the expansion will be driven by investments that will “increase significantly” thanks to lower uncertainty related to the COVID-19 pandemic, lower interest rates and projects funded by the European Union’s Recovery Fund.
The bank said its official forecast for 2021 was 4.4% growth, but that came ahead of an unusually strong upward revision of first-quarter GDP data that would add “more than half a percentage point” to average growth.
On June 1, the national statistical office ISTAT reported a GDP growth in the first quarter of 0.1% compared to the previous quarter, increasing a preliminary estimate of a decrease of 0.4%.
The most recent forecasts from the central bank reflect a steadily improving outlook for the third largest economy in the euro zone.
In April, she said growth would likely be above 4% this year, while in January, when she made her last official forecast, she estimated growth of 3.5%.
The economy contracted 8.9% last year, Italy’s worst post-war recession, when activity was hampered by repeated coronavirus lockdowns.
Italy’s GDP will return to pre-pandemic levels at some point next year, the central bank said.
It predicts that based on the EU-harmonized index, Italian consumer price inflation will average 1.3% this year and 1.2% in 2022, after falling 0.1% last year.
The unemployment rate will average 10.2% this year and 9.9% in 2022, according to the bank’s bulletin.