Italy: The outlook for the debt ratio has worsened dramatically – ABN Amro

Italy’s debt ratio has persistently remained at elevated levels in the years following the eurozone debt crisis. Economists at ABN Amro analyze where this ratio could end after the corona crisis.

Key quotes

“Italy’s GDP is expected to have plummeted in the first half of 2020. We have pencilled in sharp contractions of around 5% – 7.5% qoq in Q1 and Q2, respectively. We expect the deterioration in financial conditions and the labour market to result in a double dip recession in Q4 2020-Q1 2021.”

“We expect the cyclical deterioration in the budget balance to be equal to around 4% of GDP.”

“Our preliminary estimates of Italy’s debt ratio in the coming ten years, show a fast jump to levels close to 165% GDP in the next three years. After that, the debt ratio is expected to continue to move higher at a more modest pace.”