The COVID-19 pandemic has had a profound impact on Italy’s economy. In 2020, the Italian economy suffered a contraction of 9 percent, with a sovereign debt worth 155 percent of GDP. The pandemic led to a progressive shutdown of national economic activities, causing an unpredictable market shock in Italy, affecting both demand and supply. The economic crisis became a significant concern for Italians, with overall unemployment rates at 10 percent. Italy’s mortality rate of 3.03 percent was among the highest in the EU. The negative spillover economic and social consequences of the pandemic are expected to last longer, despite the country’s successful vaccination campaign and the less aggressive COVID-19 variants.
To counter the impact of COVID-19 on the Italian economy, the Government of Italy approved a Decree with measures amounting to €25 billion. The Decree included funding for the national healthcare system, worker relief measures, tax credits for companies’ sanitizing expenses, and the nationalization of the air carrier Alitalia. The government also provided relief measures for self-employed workers, tax payment deferrals, and financing for the air transport sector to mitigate the damages caused by COVID-19. Despite the significant economic shock, Italy achieved an impressive recovery from the pandemic, returning close to the pre-COVID level of output by late 2021. The service sector expanded strongly, with tourism recovering toward pre-COVID levels. The construction sector also boomed, and manufacturing remained in growth territory. However, the war in Ukraine and COVID-related disruptions to global supply chains have pushed up energy prices, affecting Italy’s high dependence on imported energy from Russia. The country’s recovery and resilience plan responded to the urgent need to foster a strong recovery while making Italy’s economy and society more resilient and future-ready. The plan reinforced economic and social resilience with horizontal and sectoral reforms, supporting climate objectives and the digital transition.
