Free trade and multilateralism are key to the recovery of Italy’s exports in the wake of the COVID-19 pandemic, top politicians and economists said Thursday at the launch of a new report on the outlook for Italian trade in 2020-2023.
The report, titled “Open (Again)” was published by SACE, which is Italy’s export credit agency and wholly owned by Italy’s state-owned investment bank Cassa Depositi e Prestiti (CDP). SACE works closely with and owns 76 percent of Simest, which is Italy’s support agency for companies that want to export their products.
“We need a more general return to open trade, because in the past three years especially, we have seen how certain trade tensions have generated uncertainties, which has also affected our exports,” commented SACE Chief Economist Alessandro Terzulli.
He was echoed by Italian Foreign Minister Luigi Di Maio, who said that “one of the fundamental messages of the (SACE) report is the maintenance of trade relations that are open and without barriers between the great powers.”
“We are convinced that a multilateral approach and dialogue with our partners are fundamental to coming out of this crisis,” Di Maio said. “Italy needs international cooperation, not trade wars.”
Terzulli went on to describe the “pandemic shock” from COVID-19 as “a foreshadowing of a global economy that is becoming more and more fragile while it is more and more interdependent and interconnected. And while these factors have a series of positive aspects, it clearly also exposes (the global economy) to certain fragilities.”
“One thing is certain: this pandemic shock emerged within a risk picture that was already overcrowded,” Terzulli said.
He added that “we are now facing a heterogeneous and uncertain picture, with some economies undergoing a slow recovery and entire geographical areas that are still trying to contain the spread of the infection.”
Under the first baseline scenario in which “the pandemic is stopped or significantly reduced by the end of the current year,” Terzulli said they “expect Italian exports to drop by 11.3 percent in 2020, but to effect a speedy recovery in 2021, with exports growing by 9.3 percent, and continuing to grow by around 5 percent in 2022 and 2023.”
“In Asia in 2021 … the economies that will recover the fastest from the 2020 (pandemic) shock are those that have managed the pandemic crisis faster or better than others,” Terzulli added.
Terzulli pointed to “the great speed of recovery of China,” adding that Italian exporters should “consider important opportunities in South Korea and Japan, but also in countries such as Vietnam.”
The two more negative baseline scenarios are based on another lockdown, or on an extension of current restrictive measures, should the pandemic not be brought under control.
“We must try to transform adversity into opportunity,” said SACE President Rodolfo Errore.
Economy and Finance Minister Roberto Gualtieri cited a new report by the ISTAT national statistics institute, showing that Italy’s seasonally adjusted industrial output index grew by 7.4 percent in July compared to June, although it dropped by 8 percent in July compared to the same month of last year.
These numbers “confirm that the recovery of productive activities after the March-April lockdown is significant” and therefore “a pretty strong case can be made that Italy’s gross domestic product (GDP) will make a double-digit comeback in the third quarter,” Gualtieri said.
“We face challenging months ahead (and) international trade doubtless represents a crucial and strategic sector for the Italian economy,” Gualtieri said, pointing out that the government has put in place significant financial measures to support Italy’s export-oriented companies.
“Existing close trade relations with China will have an impact on growth in various economies, especially those in Southeast Asia, which are highly integrated into regional value chains and whose principal outlet market is (China),” the new SACE report said.
SACE analysts wrote in the report, “the progressive recovery of the Chinese economy … could guarantee them (meaning other Southeast Asian economies) a driver of recovery.”
As a consequence “this will reflect on Italian exports towards those markets, such as for example in the case of the Philippines and Myanmar, where our sales will contract by more than 20 percent in 2020, and in spite of a sound recovery expected next year (Italian exports to the Philippines and Myanmar) will not manage to return to pre-crisis levels before 2022,” the report explained.
“The contractions forecast for Italian exports towards (China’s) Hong Kong and Indonesia are slightly under (20 percent), but in these cases the recovery next year will be more significant,” the analysts wrote in reference to the Hong Kong and Indonesian economies.
SACE added that “our exports towards Singapore and Thailand will largely return to 2019 levels in 2021, while in the case of Vietnam, they might even be surpassed.”