Economy & Covid-19: what to expect in 2021
A year after the outbreak of Covid19 pandemics, the world economic sanitary crisis results anything but overcome, with strong persistent criticisms in Europe, in North and South America above all, while in Asia sanitary emergency has apparently relaxed its grip.
Generally speaking, total number is extremely heavy: over 2 million and 800,000 dead and more than 132,000 confirmed cases worldwide, with daily contagions increasing more and more at very high pace, even with important differences between Earth areas.
Europe is among the most affected territories, with over 990,000 deaths and over 46 million contagions; in North America contagions had been beyond 35 million and about 816,000 deaths; in South America recorded cases have been about 22 million up to now, with 577,000 deaths (estimates WHO and JHU 8th April 2021).
In the above context, world GDP decreased by 3.3% in 2020 and IMF forecast for 2021 indicate a growth by 6.0 %, a come back to pre-pandemic figures by half year provided that vaccination campaigns proceed quickly and succeed in winning the race against emerging variants of virus, anticipating its mutations. There are still wide differences in growth prospects among countries, caused also both by different degrees of spreading of vaccines and by differences between sectors, the service sector still being the most penalised by economic-sanitary crisis (among which tourism, entertainment and catering above all), even though the gap of uncertainty between manufacturing and services is shrinking.
Europe has particularly been affected by this year of pandemic, with a fall of economic activity more intense in comparison to main economic areas of the planet: GDP of EU decreased by -6.1% in 2020, against reduction by -3.5% in USA and (even) a growth by 2.3% in China, which came back to pre-pandemic growth levels already at the end 2020.
As for 2021, notwithstanding the arrival of third virus wave has frozen economic recovery which also in Europe had been glimpsed at the end 2020, we may look at the new year with more optimism, detecting some important trust aspects both in Europe and in Italy.
As far as Europe is concerned, the most important sign has been prompt reaction to this crisis of historical significance by European institutions, which intervened with the approval of extensive programme of Next Generation EU (NGEU) which will allocate in the whole 750 billion euro in support to the recovery in Europe which will provide already in the current year about 50 billion of non-refundable grants, as anticipations on National Recovery and Resilience Plans (NRRP) which is currently being defined in member states.
Another important signal is the launch on a large scale of vaccination campaign (about 100 million vaccines have presently been administered in Europe, of which almost 38 million in the United Kingdom) which is being positively affecting trust climate of both economic operators and families, necessary condition for new start of investments and consumptions and, along with them, of economic recovery. Possible increase of administration rhythm would further improve growth prospects (presently 4.4% in 2021), allowing a quicker loosening of containment measures.
As for Italy as well (estimated growth 4.2%), 2021 began with important news. Most important was the new government, led by a personality of major international authoritativeness and competence as Mario Draghi, and inclusion of technical ministers, particularly expert in key sectors of Next Generation, posing bases for an efficient implementation of NRRP, in view of grants provided by NGEU, and efficient use of them. Among ministers: Maria Cristina Messa, appointed to the Ministry of University and Research, Roberto Cingolani, who has been trusted with ecological transition, main challenge introduced by NGEU, to which NGEU itself allocates 37% of available resources, become in a few months reference point not only for European politics, but also for Member States; Vittorio Colao, minister of technological innovation and digital transition, the other great intervention area promoted by European Union to which 20% of resources provided by Plan are allocated.
We should not forget, moreover, that Italy will be main beneficiary of NGEU: the European contribution for Italy will amount to 209 billion euro in the whole, to be spent in 6 years, of which 81 billion as transfers of non-refundable grants and 128 billion as loans. The above funds, beyond representing a necessary tool for coming out of crisis, represent for Italy an unprecedented opportunity for undertaking renovation path of infrastructures, material and immaterial, but also for carrying out all the reforms Italy requires, ranging from Public Administration to fiscal reform and to reform of EU Procurement Code and implementation modalities of public investments.
As for the latter point, in particular, it would be advisable to renovate in Italy allocation process of public contracts or at least to launch actions promoting voluntary actions by Contracting Authorities of the rule provided for by 137 article of EU Procurement Code, in compliance to which contracts should be prerogative of European companies (or extra EU countries with which the Union has either mutual customs recognition or duty equity), for at least 50% of the amount of contracts themselves. It is an appreciable article, which effectiveness is still invalidated because it has to be voluntarily adopted by Contracting Authorities of EU Member Countries.
All interventions which will be carried out by means of NGEU funds will be integrated in a economic-productive context reinforced in comparison to the past, thanks to reforms introduced from 2014 to 2017 which made Italy no longer backseat of Europe as for productiveness and added value generation. To be pointed out, in particular, that quadriennium 2015-2018 recorded exceptional growth for Italian manufacturing (+2.7% average per year) higher than that of Germany or France in the same period.
Moreover, still 2015-2018 Italian manufacturing recorded as well the largest increase in job productiveness for number of employees between GT7 countries and Spain (+2.2% average per year).
Recovery of Italian economy after Covid-19 will start again exactly from where the expansive phase 2015-2018 had stopped, that is manufacturing industry. And the stronger it will be, the more capable Italy will prove to profit from Next Generation EU for renovating its public administration and its infrastructural system.
By Marco Fortis* and Monica Carminati**
Edison Foundation, Italy
*Marco Fortis is managing director of Edison Foundation and vice-president of Scientific Committee of Edison Foundation. He has been Lecturer of Industrial Economy and Foreign Trade at the Political Science Faculty of Cattolica University of Milan.
**Monica Carminati is senior researcher at Edison Foundation where she mainly deals with international competitiveness, local economic systems and industrial economic subjects.