The Italian economy is going to contract between 9% and 13% in 2020 because of the crisis caused by the coronavirus pandemic, according to the Bank of Italy.

Italy became the first European state to be hit by the pandemic and imposed a strict two-month lockdown, paralysing much of the country’s economic activity. More than 30,000 people have been killed by the coronavirus in the country so far.

The Italian economy already shrank by 5.3% in the first quarter of the year, which is worse than the earlier projection of 4.7%, the worst first quarter decline since 1995, according to the Italian statistical body ISTAT.

A study by Mediobanca, a large merchant bank, estimated that the 2020 GDP loss could be about EUR 170 billion, equal to the GDP of the province of Veneto, the third largest industrial region in Italy.

“We’re waiting for figures at the end of May but indications are that between 700,000 and a million jobs are in danger,” the head of the main Italian business confederation Cofindustria, Carlo Bonomi, warned, as cited by AFP.

“Jobs are only created if there is growth, innovation, investment. The car manufacturing crisis can’t be solved with subsidies or furloughing. You solve it by looking to the future, by investing in new technologies,” he said.

Italy is now going to be the main beneficiary of a European Union 750-billion-euro recovery plan announced by the European Commission earlier this week, although even that might prove to be insufficient as the country faces its worst recession since World War II.

Business confidence in the Eurozone’s third largest economy in May plummeted to its lowest level since ISTAT started the index in March 2005.

“The health and economic emergency has swept businesses away, especially in shops, services and tourism,” small business federation Confesercenti said.

“[Because of] the lack of liquidity necessary to pay costs and salaries… we are close to a point of no return and that’s why the measures decided by the government (loan guarantees, SME subsidies) must be operational immediately,” said federation head Patrizia De Luise.

“We need to reduce bureaucracy and accelerate and simplify procedures, because if support is delayed again, many businesses will have no option but to stop,” she said.

The government last week accused banks of not acting quickly enough, but they said that they had already passed on around 400,000 loan requests worth more than 18 billion euros ($20 billion) to the state-backed Central Guarantee Fund.

Consumer confidence went from 100.1 points in May to 94.3 in March, its lowest level since December 2013.

According to a Confcommercio-Censis poll published on Tuesday, 53% of Italian families see their future negatively and 68% see the country’s future negatively.

The lockdown caused 42% of families to reduce their work and income, 26 percent have stopped work and 24% have been furloughed.

Six out of 10 families fear losing a job, as a result of which 28% have decided to take no holidays nor long weekends.

(Banner image: Flickr)