The note of the month of March on the trend of the economy
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The government’s planned tightening to stem the spread of coronavirus involves 34% of production. This is what emerges from the March note on the trend of the economy published by Istat. Not only that: in a scenario “characterized by the extension of the restrictive measures also in the months of May and June, the reduction in consumption would be 9.9%, with an overall contraction in added value equal to 4.5%”. The limitation of production activities until the end of April would instead determine, on an annual basis, “a reduction in final consumption of 4.1%”, he explains.
At present, 34% of production activities are closed
«The measures aimed at limiting the contagion from COVID-19 have led, in recent weeks, to the progressive closure, partial or total, of a large number of production activities. According to the 2017 National Accounting data referring to the total economic and inclusive activities of the non-observed component of the economy – reads the Istat report -, the limitation of productive activities would involve 34.0% of production and 27, 1% of the added value. Although limited in time and restricted to a subset of sectors of economic activity, these measures are capable of generating a significant and widespread shock on the entire production system. In fact, in addition to the direct effects connected to the suspension of the activity in the sectors involved in the measures, the production system would also suffer the indirect effects linked to the intersectoral relations ».
The first scenario: limited squeeze in March and April
The estimates, made at current values, consider two different scenarios: the first assumes that the limitation of production activities occurs only for the months of March and April; the second assumes that it extends to June. Considering the first scenario – explains Istat – the limitation of production activities until the end of April would determine, on an annual basis, a reduction in final consumption equal to 4.1%, with a decrease in the added value generated by the Italian production system equal to 1.9% (1.5 percentage points directly related to sector shocks, 0.4 points due to indirect effects). The greatest contribution to the drop in overall added value would come from the contraction of the expenses for other services – net of tourist expenses – (-0.9 percentage points), while the contribution of the reduction of expenses for goods and tourist expenses would be respectively by -0.7 and -0.4 points. In employment terms, the fall in value added would involve 385 thousand employees (of which 46 thousand are not regular) for an amount of around 9 billion euros in salaries. The drop in value added compared to the scenario in the absence of lockdown is highly heterogeneous at the sector level. The housing and catering (-11.3%) and trade, transport and logistics (-2.7%) sectors would suffer the strongest contractions while the consequences on the sectors that produce investment goods and on construction would be less incisive (less than a percentage point).
Second scenario: restrictive measures extended also to May and June
As for the second scenario, characterized by the extension of the restrictive measures also to the months of May and June, the reduction in consumption would be 9.9%, with an overall drop in added value equal to 4.5% (3.4 points as a consequence of direct effects, 1.1 points due to indirect effects). The contraction in tourist demand would contribute to the decrease by 0.9 percentage points, that for other services and that for goods both for just under 1.8 points. In this second scenario, the employees involved would be just under 900 thousand, of whom 103 thousand are not regular, for a total of 20.8 billion in salaries.
To know more:
● Confindustria, for Coronavirus huge GDP loss in the semester: -10%
● Coronavirus, government green light to liquidity decree: 400 billion immediately for businesses
