Italy's economy contracted by 12.4% in the 2nd quarter, the national statistics bureau Istat said on Friday, July 31, as coronavirus lockdowns knocked the country's output back to the level of a quarter century ago.
The plunge in quarter-on-quarter gross domestic product (GDP) took Italy – the eurozone's 3rd largest economy – into recession as it had shrunk by 5.4% in the 1st quarter.
A recession is commonly defined as two consecutive periods of a quarter-on-quarter drop in GDP.
Compared with the 2nd quarter in 2019, GDP fell by 17.3%, according to Istat's first estimate.
"After the sharp contraction recorded in the 1st quarter, the Italian economy suffered an unprecedented contraction in the 2nd quarter, as the health crisis and the containment measures adopted fully produced their negative economic effects," Istat said.
It said the drop was "part of an international context in which the main economies are recording reductions of a similar magnitude due to the spread of the pandemic."
The drop took the output of Italy's economy all the way back to the level it recorded in the first quarter of 1995, Istat said.
Italy was the first European country to be hit by the pandemic, which has officially killed over 35,000 people in the country. A more than two month lockdown begun in March severely crippled the country's economy.
The Italian government plans to add 25 billion euros to the 2020 budget for employment and income support, which will bring the public deficit to 11.9% of GDP, the highest in the eurozone.
That budget increase will raise Italy's debt to 157.6% of GDP.
In April, ratings agency Fitch cut its outlook on Italy's sovereign debt to BBB- with a stable outlook, or one notch about "junk." Moody's did the same in October 2018, well before the pandemic. – Rappler.com