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IMF Executive Board Concludes 2020 Article IV Consultation with Italy

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Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2020 Article IV Consultation with Italy







March 19, 2020















WASHINGTON, DC
On March 18, 2020, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation

[1]

with Italy (see important note below on the timing of
the report, which predates the outbreak of COVID-19).

[2]


Executive Board Assessment

[3]

Executive Directors expressed deep sympathy to the Italian people and the
authorities for the high human and economic costs of the COVID 19 pandemic.
They also conveyed their solidarity with Italy at this difficult time and
commended the authorities for their resolute response, including their most
recent decisive actions, and called for coordinated regional and
international actions to address the effects of the pandemic.

While Directors broadly agreed with the thrust of the staff appraisal, they
noted that the extensive discussion of medium-term issues in the staff
report reflected the challenges and priorities facing Italy prior to the
outbreak of COVID 19. They recognized and supported the authorities’
near-term priorities that have rightly shifted to combating the pandemic
and supporting health care, workers, firms and households.

Directors considered that the outbreak has created both health and economic
emergencies that need to be addressed urgently, while amplifying
uncertainty and downside risks. Once the health crisis has passed, they
stressed the need to implement a comprehensive package of measures to boost
potential growth and enhance resilience. This should comprise structural
reforms to raise productivity and investment, a credible medium-term fiscal
consolidation to put public debt on a firm downward path, and measures to
support financial sector health.

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Directors commended the authorities for their prudent implementation of
fiscal policy in 2019 that was better than expected. They recognized that
the fiscal balance will worsen this year on account of the pandemic effects
and response. They welcomed the authorities’ plan to undertake medium term
fiscal consolidation, once the pandemic has subsided, and urged
implementing growth friendly and inclusive measures, including
comprehensive tax reform.

Directors commended the authorities for the progress made in strengthening
banks’ balance sheets. They welcomed the findings of the FSAP and stressed
the need to address resolutely remaining financial sector vulnerabilities,
strengthen banking sector resilience, improve the viability of bank
business models, and reinforce the crisis management framework. Most
Directors noted that the use of the Deposit Guarantee Scheme (DGS) for
preventive measures outside resolution or liquidation could be a useful
instrument, in line with the DGS Directive. Moreover, its use should not be
overly restricted but justified on a case by case basis. While
acknowledging the importance of moderating the sovereign bank nexus, many
Directors pointed to the need for a careful assessment of the benefits and
costs and that the envisaged approach should be in line with discussions at
the EU level.



Italy: Selected Economic Indicators, 2017–22

2017

2018

2019

2020

2021

2022

Real Economy (change in percent)

Real GDP

1.7

0.8

0.3

-0.6

0.8

0.8

Final domestic demand

1.5

1.2

0.4

-0.1

0.7

0.7

Exports of goods and services

5.4

2.3

1.2

-1.9

5.3

3.2

Imports of goods and services

6.1

3.4

-0.4

-2.0

4.9

3.1

Consumer prices

1.3

1.2

0.6

0.7

1.0

1.2

Unemployment rate (percent)

11.3

10.6

10.0

10.4

10.2

10.1

Public Finances

General government net lending/borrowing 1/

-2.4

-2.2

-1.6

-2.6

-2.4

-2.3

Structural overall balance (percent of potential GDP)

-1.8

-1.9

-1.3

-1.5

-1.8

-1.8

General government gross debt 1/

134.1

134.8

134.8

137.0

136.9

136.2

Balance of Payments (percent of GDP)

Current account balance

2.7

2.6

3.0

3.1

3.2

3.0

Trade balance

3.0

2.5

3.3

3.3

3.3

3.2

Exchange Rate

Exchange rate regime

Member of the EMU

Exchange rate (national currency per U.S. dollar)

0.9

0.8

0.9

Nominal effective rate: CPI based (2000=100)

100.9

103.8

Sources: National Authorities; and IMF staff calculations.

1/ Percent of GDP.




[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

The staff report reflects discussions with the Italian authorities
in January 2020 and is based on the information available as of
January 28, 2020. It focuses on Italy’s medium-term challenges and
policy priorities and was prepared prior to the outbreak of
COVID-19 in Italy. It, therefore, does not cover the outbreak or
the related policy response, which has since become the overarching
near-term priority. The outbreak has greatly amplified uncertainty
and downside risks around the outlook. Staff is closely monitoring
this health crisis and will continue to work on assessing its
impact and the related policy response in Italy and globally.


[3]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
here:

http://www.imf.org/external/np/sec/misc/qualifiers.htm

.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Andreas Adriano

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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