Post-Covid Prospects: Italy
02 June 2021
On 21 February 2020, Italy’s first case of Covid-19 was confirmed in the town of Codogno, near Milan in the Lombardy region. It was the first European country to be impacted by the coronavirus pandemic. The massive containment measures and lockdowns of various degrees of severity imposed to curb the spread since the onset of the pandemic have sunk the EU’s third largest economy into a record post-war recession, its GDP sliding by 8.9% last year.
To reboot the economy, the Italian government is pinning its hopes on a €222bn five-year investment and reform plan – the so-called National Recovery and Resilience Plan. Supported by the €750bn Next Generation EU recovery plan , the aim is to “repair the economic and social damage” wrought by the pandemic and address “weaknesses that have plagued the Italian economy and society for decades”.
Italy, like many countries across Europe, has recently been ramping up restrictions again in an attempt to stem new waves of infections propelled by the spread of deadlier, more contagious variants of the coronavirus. However, the finalisation of the national post-Covid recovery plan – together with the successful launch of the national vaccination campaign – are bringing Italy and its people closer to normalcy.
Louis Chan, Assistant Principal Economist (Global Research) at HKTDC, interviewed Clemente Contestabile, Italy’s Consul General in Hong Kong, to discover how, from his vantage point, Italy and its businesses are preparing to use Hong Kong’s status as a premier business and trading hub in Asia to aid a post-Covid recovery in the near future.
Chan: How is the vaccination programme progressing in Italy? Do you have a timetable or a roadmap to indicate when the majority of the population will be vaccinated?
The Italian vaccination programme was launched on 27 December 2020 in coordination with other EU member states. The Italian government has reserved 215 million doses of Covid-19 vaccines for its 60 million people. The national vaccination plan is now in full force and Italy is ranked among the most effective countries in the world in terms of the number of doses administered.
Thanks to more stable vaccine deliveries and better coordination among the country’s 20 regions, Italy has seen the pace of its vaccination rollout accelerated to more than 500,000 shots per day from the start of May. By 31 May 2021, more than 34.4m doses had been administered and more than 11.8m people, or 20% of the population, had been fully vaccinated, making the path to herd immunity – at least 70% of the population being fully vaccinated – by the end of September a lot more straightforward.
Chan: What is the near- to medium-term outlook for Italy’s major industries and trade, in view of the government support that is being provided during the pandemic? When are you expecting the vaccine-boosted recovery to kick in?
Contestabile: Italy was the first European country to be hit by the virus and go into a national lockdown. The economic consequences of the outbreak also plunged the country into its steepest peacetime recession.
Despite the growing anxiety about new coronavirus variants and the possible delays in the reopening plans, the near-term outlook of the Italian economy remains fairly optimistic, with the EU, IMF, OECD and Bank of Italy expecting to see growth of 3-4% this year and the next. This is thanks largely to conditions being in place to enable the resumption of normal business operations, underpinned by the increasingly robust vaccination response both in Italy and the EU.
In the run-up to the summer tourist season, we and our EU peers have agreed on the introduction of mutually recognisable EU Digital Covid Certificates, which will facilitate the relatively free movement of individuals within the EU to resume from 1 July. Once available, the certificate, which may be in a digital or paper format, can be acquired free of charge by every person staying or residing in an EU Member State who has been vaccinated, recovered from the illness or who has had a recent negative test. Eligible visitors who have the right to travel to the EU, including Hong Kong businesspeople and tourists, will also be able to secure the document.
In the medium-term, the EU’s 2021-2027 budget, coupled with the temporary instrument, Next Generation EU, will pool together a €1.8tn stimulus package – the largest ever financed in Europe – to repair the immediate damage to the pandemic-stricken economy on the one hand, and rebuild a greener, more digital and more resilient post-Covid Europe on the other.
Italy is the largest recipient, in terms of absolute value, of the €750bn Next Generation EU recovery package. The country’s recovery and resilience plan is structured around six areas: digitalisation, innovation, competitiveness and culture; the green revolution and ecological transition; infrastructure for sustainable mobility; education and research; cohesion and inclusion; and health. With a massive investment on green and digital transition by upgrading transport infrastructures, extending our high-speed train network and supporting education, scientific research, culture, tourism and healthcare, we are expecting to add an extra 3.6 percentage points to GDP growth by 2026.
Chan: The Covid-19 outbreak has seen many businesses turn to e-commerce, while people have learnt to work, study, and exercise at home. What can you tell us of the digital transformation that has taken place in Italy since the onset of the pandemic? How might these behavioural changes affect the consumer and industrial landscape in Italy in the post-pandemic era?
Contestabile: Italians have been resilient and quick to adapt to the many restrictions put in place to counter the Covid-19 pandemic. With intense shelter-in-place orders rendering many facets of everyday life inaccessible, consumers and retailers alike have responded fast to absorb the new realities into their lives and business. This has seen an unprecedented surge in the volume of traffic to online marketplaces.
Prior to the pandemic, only 10% of Italian companies had online businesses, and only 44% of consumers had ever made an online purchase, compared to a European average of 68%. But in 2020, it is estimated 70% of Italians aged between 18 and 65 made at least one purchase online, generating a rapid increase in e-commerce transactions in the country. The global health crisis has triggered a major change in consumer and corporate behaviour. Many companies, including small neighbourhood stores, have braced themselves for change by embracing and offering more digital payment services, such as e-wallets, immersive online shopping experiences and safety-first, contactless fulfillment options.
Despite scoring low on the European Commission’s Digital Economy and Society Index (DESI), Italy is among the best performers when it comes to the assignment of 5G spectrum. This is a precondition for the commercial launch of 5G, which will provide ubiquitous, ultrahigh bandwidth and low latency connectivity to both individual users and connected objects for a wide range of applications and sectors, including professional uses such as smart mobility, e-health and smart grid.
With the current global pandemic heightening the importance of access to a fast and reliable broadband connection, the Italian recovery plan will set aside more than €30bn to boost digitalisation and innovation in the manufacturing industry, as well as in public administration services, with a modern and robust digital infrastructure. This, together with initiatives like “Italia 2025” (a five-year plan adopted before Covid in December 2019 that puts digitisation and innovation at the centre of the country’s development), will continue to spearhead the nation’s digital transformation and allow the Italian economy to come out of the pandemic stronger and more tech-ready.
Chan: International logistics have been upended during the pandemic, hampering both air and sea transportation. How has the Mediterranean network – sea, air and rail – been lending support to Asia-Europe trade? What’s the role of Italy there, especially given its strong economic relations with Central and Eastern Europe and the Western Balkans?
Contestabile: It is no surprise that we see no port winner in 2020, even though most Italian ports remained up and running during most of the coronavirus lockdowns. However, the situation has not reduced investment in handling capacity across a number of major port facilities and terminals, because operators see the urgent need to keep pace with the growth in the size of modern container ships and the ensuing demand from shipping lines for services for bigger vessels.
The Mediterranean accounts for 30% of the world’s oil trade and 20% of global maritime traffic. There are 500m consumers and 450 ports and terminals in the area. Nurturing trans-Mediterranean commercial connectivity with Italy at its heart has therefore been one of our strategic priorities, especially when it comes to trade, energy and transportation in the wider Mediterranean region, spanning North Africa, the Balkans and beyond.
Without taking anything away from rail and air freight, the Mediterranean motorways of the sea – or sea highways – play a strategic role in Asia-Europe trade. This has been especially true during the Covid crisis. Genoa and Trieste, in particular, have been consolidating their roles as the Mediterranean ports of entry and departure for the Eurasian maritime sea routes serving the Western and Central/Eastern European markets.
Two out of the four sea corridors designated for the new intermodal maritime-based logistics chains in Europe – the Motorway of the Sea of South-east Europe (connecting the Adriatic Sea to the Ionian Sea and the Eastern Mediterranean) and the Motorway of the Sea of South-west Europe (the Western Mediterranean, connecting Spain, France, Italy and including Malta, and linking with the Motorway of the Sea of South-east Europe and the Black Sea) – involve the Mediterranean Sea and thus Italian ports. The Italian government is launching a national investment programme, with a budget of some €3.5bn, to improve the competitiveness and environmental sustainability of the nation’s port system, in order to develop more connected and efficient trade links with all the major European shipping lines and enhance the role of Italian ports and logistics services in global trade and logistics.
Chan: Global trade and investment were weakened by the pandemic as many travelling and business plans were shelved or postponed last year. Looking forward in 2021 and beyond, what do you see as the most promising sectors or areas for Italy-HK collaboration?
Contestabile: There is abundant space to strengthen trade and investment between Italy and Hong Kong. The SAR is not just a premium market for Italian exports, but also a place where Italian companies historically found partners and investors to scale up their business in mainland China and South-east Asia.
We see great opportunities for partnership in the fields of pharmaceuticals, biotech, cosmetics, design furniture and green technology. For example, Italy, which ranked first in Europe for the third consecutive year in terms of the circular economy and boasted the region’s highest recycling rate with regard to total waste, is home to some of the most innovative recycling technologies in the world.
This includes Fater Smart, based in Treviso, the first industrial facility to recycle diapers and sanitary napkins and the first plant to produce bio-butanediol directly from sugars, paving the way for the production of new chemical intermediates from renewable sources.
Our green enterprises and environmental pioneers are ready for partnerships with public and private players to help introduce their cutting-edge technological solutions in a wide range of green sectors and play a part in the building of a carbon-neutral Hong Kong by 2050.
Likewise, Italy welcomes foreign investors with generous investment incentives, including tax credits, soft loans and investor visas. There is great promise for Hong Kong companies across a wide spectrum of areas, from real estate, hospitality, life sciences, food-tech, green technology and clean energy, machinery and automotive to ports and logistics. To bring our bilateral trade and investment to a higher level, the Italian Trade Agency (ITA) will soon open an FDI Desk in Hong Kong to support local companies looking to invest and grow their businesses in and from the Italian market.
Chan: How about the Greater Bay Area (GBA) and Belt and Road Initiative (BRI)? Are Italian companies – start-ups and scale-ups – keen to make inroads into the GBA or BRI projects? How can Hong Kong companies best help?
Contestabile: In the coming decade, it is estimated that China will contribute more than one-third of global economic growth. With the GBA being a key driving force of this, we can see enormous opportunities for our manufacturers, service providers and start-ups. By using Hong Kong as their headquarters, visionary Italian entrepreneurs have been investing in the Guangdong province since the inception of China’s “open-door” policy.
Following the announcement of the GBA “Framework Agreement” on 1 July 2017, the Consulate General of Italy, the Italian Chamber of Commerce and the Italian Trade Commission in Hong Kong have arranged a series of business missions to the GBA for Italian hi-tech companies and start-ups, to offer them a more hands-on perspective of the huge potential in innovation and technology crossovers.
Thanks to its world-class professional services and the unique advantages offered by the “One Country, Two Systems” principle, Hong Kong will continue to be Italy’s trusted partner in the post-pandemic future. We very much look forward to working with Hong Kong businesses to bring to the rest of the GBA and BRI markets more of the Italian lifestyle we enjoy in Hong Kong, from fashion, gastronomy and wine to high-end design and furniture.
 €750bn in 2018 value terms or €806.9bn today.
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