A recession in Italy looked likely even before coronavirus – ABN AMRO

"Italy’s economy already was in poor shape before the coronavirus hit the northern part of the country," noted ABN AMRO economist Aline Schuiling and head of financial markets research Nick Kounis.

Key quotes

"In January, so before the outbreak of the coronavirus in China, Italy’s manufacturing PMI jumped higher, but remained at a level (48.9) below the long-term average value and consistent with ongoing contraction in industry. The composite PMI also increased in January (to 50.4, up from 49.3 in December) but also stayed below its long-term average and at a level consistent with stabilisation of GDP."

"Considering Italy’s relatively close industrial trade links with Germany, we had already expected that Italy would be one of the eurozone countries that would be hit relatively hard by the outbreak of the coronavirus in China and the rest of Asia."

"Before the coronavirus reached Italy, we were projecting a 0.1% contraction in Q1 (which would mark a technical recession), before stabilisation in Q2. The possible direct effects of the coronavirus on Italy discussed above, will likely deepen the contraction in Q1 and see another fall in output in Q2. "