ROMA – The S&P agency kept Italy’s rating unchanged at BBB and confirmed the outlook at stable. If the pandemic has deteriorated the country’s public finances, the massive support of the European Recovery Fund – equal to 12.5 per cent of national wealth (GDP) – guarantees Italy’s stability.
The agency analysts add: “The acceleration of Italy’s vaccination program, together with the doubling of fiscal stimuli, should facilitate a solid economic recovery during the second half of this year. We estimate that GDP will increase by 4.7. % this year and 4.2% in 2022 “.
Speaking of vaccines, “we expect 80% of the Italian population to be covered by late autumn, leading to a strong recovery” in commercial, tourist and industrial activities.
Of course, the extraordinary expenses of the last year determine a ratio of 11.6% between deficit and GDP and of 149% between debt and GDP.
In addition to the pandemic, Italy is suffering from other weaknesses that come from afar: “A weak business environment, anti-competitive behavior in services, an inefficient judicial system, a cumbersome public administration (particularly at the level of local authorities) and misalignments of competences on the labor market together with the relatively high financial and legal costs of layoffs “.
Labor productivity, continues the rating agency, “is not homogeneous throughout Italy; the industrialized Center-North is more productive than the EU average”. Furthermore, on a per capita basis, S&P points out, “there are more companies with a higher average number of employees in the Center-North than in the South. With 28.5% of the total workforce compared to the EU average of 13%, it also stands out the percentage of self-employed workers in the Italian labor market; only Greece has a higher percentage “.
It is too early to draw clear conclusions on the repercussions of the pandemic in Italy: “The low spread of digitization – observes S&P – contributes to low labor productivity but Covid-19 has stimulated considerable innovation in this field. The Draghi government proposes to invest around 2.8% of GDP from EU funds to digitize public services, small and medium-sized enterprises and for broadband, 5G and satellite infrastructures “.
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