What effect on the economy will the Italy Shutdown have?- Shaheer Rizwan (ECO1)

The 2019-20 coronavirus pandemic, referred to as COVID-19, is an ongoing worldwide pandemic of the Coronavirus disease. The outbreak was first identified in Wuhan, China in December 2019, and was officially recognised as a pandemic by the World Health Organisation (WHO) on the 11th of March 2020. As of 14th of March, there are approximatley 150,000 cases worldwide, with the majority of the cases reported from the disease, originating from mainland China. The other countries/reigons which were also severly effected from the outbreak include; Italy, Iran, South Korea, Spain and United States. On the 13th of March 2020, the WHO declared Europe to be the epicentre of the pandemic.

Public health responses have included travel restrictions, quarantines, event postponements or cancellations, and facility clousres. These include a quarantine of the Hubei province of China, the nationwide qurantine of Italy and Spain, various border closures or incoming passenger restrictions and school and work closures. These responses and restrictions imposed from countries and world organisations, have proven to have a significant impact on the economy all around the world. Evidence of economic impact due to the outbreak of coronavirus include; the Dow Jones stock market index dropping 2,000 points in one day which is a record drop for the index, before a +1,985 points increase in one day, which is also the record gain for the index. Another piece of evidence surrounding the economic impact that this pandemic crisis will have, is the shutdown of the entirety of Italy, after a surge in cases (over 17,000 cases developed from 1st of March to 14th of March), forced the Italian Government to stop all operations in the country, which included the closure of schools, universities and businesses.

Although most of the country is in lockdown, some workers have been spraying high-concentration disinfectants around popular areas, in an effor to sanitise the country.

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TABLE OF CONTENTS

Impact on Global Trade

Italy’s major trading partners
Italy’s most imported and exported goods and services
Impact of coronavirus on trade

Impact on Sporting Events in Italy

Serie A (Italian Football League) economic impact of previous tournaments
Impact of coronavirus on Serie A

How will Italy recover from the coronavirus’s economic impact?

References

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IMPACT ON GLOBAL TRADE

Italy’s Major Trading Partners are mainly located in Europe, with 68% of imports and 62% of exports of the country, coming from other European countries in 2019. Out of the European countries, Germany ranks first for both exports (13%) and imports (17%) of Italy, followed by France with Italy importing 9% of its goods from France, and exporting 11% of its goods to France. Outside on the European region, in 2019, Italy mainly imported from China (7.3%) and the United States (3.8%).

The Goods and services Italy, imports and exports differ depending on the country, which is usually stated in a formal document, called a Free Trade Agreement, which both countries agree upon as to what to import and export to each other and the tariffs and duties that each country will impose depending on the good or service type. As France, Germany and Italy are all part of the European Union, no formal free trade agreement is needed betweeen the three countries, as the European Union controls what can and what can’t be imported/exported and the tariffs and duties implied on certain products. In 2019, Italy mainly exported Machinery , Vehicles and Automotive Parts, and Metals such as Iron and Steel to Germany and France. This is mainly due to the high quality of these goods produced in Italy. Some notable Italian brands which export such products include Automotive Brands such as Lamborghini, Ferrari and Fiat and custom computer part manufacturers which work with brands such as HP, Asus and Lenovo. In terms of Italy’s imports from France and Germany , it is very similar to its exports, with the country importing vehicles, machinery (mainly nuclear reactors) and pharmaceutical products in 2019. The similarity in types of products being both imported and exported, suggests that the trade between the Italy and France/Germany is simply swaps of goods to get either get more variety in goods in the country or so the country can get better economic output with the good provided. In terms of Italy’s exports and imports outside of Europe, Italy mainly imports Organic chemicals, furniture, articles of apparel and advanced machinery from China, but does not export much to China as a return. In terms of Italy’s relation with the United States, it mainly imports Pharmaceutical products, Mineral Fuels and Oils and Aircrafts and in return, exports vehicles, beverages and articles of apparel (clothing). In 2019, Italy was the 8th largest economy in the world, Italy exported USD$449 billion worth of goods, and imported USD$398 billion worth of goods. This gives the Italian economy, a trade balance figure of +USD$51 billion for the year of 2019. The Trade Balance statistic, provides a measure of the relative strength of a country’s economy.

The Impact of coronavirus on the trading status of Italy will be quite significant. Besides the worrying effect the virus will have on human life in Italy, the epidemic could also have negative conetations on Italy’s trade status on the global economy. This epidemic crisis, could ruin the relationship between Italy and other European countries, with less goods being produced across Europe, and trading restrictions being put into place as precaution, not only will there be a slow production rate of goods and less goods being imported and exported, but it could potentially bring out a “fight” between the countries for more goods and services, potentially starting another World War, as the Wall Street crash of 1929, caused the Great Depression which led to World War 2, the Coronavirus has led to a Global Stock Market Crash (although recovering) and panic buying. When the cornovirus is controlled and trade and production has started, an urge for trade between countries might start up disputes and arguments, and potentially stir up World War 3.

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IMPACT ON SPORTING EVENTS IN ITALY

The Serie A is a professional league competition for football clubs, located at the top of the Italian football league system. Analysing the ReportCalcio 2019, which is a financial press release by the Italian Football Federation for the entirety of football competitions in Italy (not only the Serie A), it can be seen that the economic impact of football is significant. The Socio-Economic Impact and Value Produced for was €3.08 Billion.

A Graphic Representaiton of the breakdown of the Socio-economic Impact of Football in Italy.

With the Coronavirus outbreak in Italy, the Italian Government officially suspended all sporting events across the country, including Serie A football matches, as the country’s lockdown was extended nationwide. With 11 Gameweeks to go for the tournament, and it all being potentially suspended, I believe that this could have big negative connetations on not only the economy of the country, but also effect the clubs themselves. This is because, clubs gain there income through sponsorships when playing, and winning games in the league, if their are no games running, the opportunity to get income is very minimalist and unlikely to happen. No games being played can also effect the jobs of alot of people, specifically those who work in stadiums, as suspending the season after the coronavirus, will not allow for them to resume work after the crisis is controlled.

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HOW WILL ITALY RECOVER FROM THE CORONAVIRUS’S ECONOMIC IMPACT

It is expected for the Italy to go through an economic contraction later this year after the coronavirus epidemic is somewhat controlled. An economic contraction, can be simply defined as a decline in national output as measured by gross domestic product (GDP). This includes a drop in real personal income, industrial production and retail sales. It increases unemployment rates, as companies stop hiring to save money in the face of lower demand. After the coronavirus, Italy’s economy will simply not produce at the required rate to supply the demand in the country and will therefore result in less national output, which will result in a significant drop of the countries GDP. This process will go on for a while, until Italy starts exporting its goods overseas and gets overseas support, this will help significantly increase its national ouput, which can help reduce unemployment from the aftermath of the coronavirus and will be the turning point of the recovery process, as there will be more exporting and importing opportunties, to ultimately get the economy to its full functioning form. However, as previously mentioned, with less goods being produced across Europe, and trading restrictions being put into place as precaution, not only will there be a slow production rate of goods and less goods being imported and exported, but it could potentially bring out a “fight” between the countries for more goods and services, potentially starting another World War.

On the left, is the Milano Indice di Borsa (Benchmark stock market index for Italy), the index dropped 5,700 points since the start of March. On the right, is the total cases of coronavirus in Italy, on the 1st of March, there were 1,700 active cases, that number has spiked to 21,000 in around 2 weeks. The corelation between the number of cases and the stock market can be clearly seen in the two graphs above, as the number of cases increased, the value of the FTSE MIB, dropped.

Some questions I have from researching the economic effect of coronavirus on Italy are as followed;

Due to the recent stockmarket crash and the fast recovery, and the rise in coronavirus with no real vaccine, does this mean that another major stockmarket crash is on the way?
How will this pandemic effect the relationship between Australia and Italy?
Can the coronavirus pandemic, potentially, lead to another World War?
If the effects and aftermath of coronavirus are prolonged for more than a year, will the global economy go into recession, and who will be most effected?

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REFERENCES

2020 Coronavirus Pandemic in Italy- bit.ly/COVID-19ItalyWiki

Italy- Coronavirus Statistics- https://www.worldometers.info/coronavirus/country/italy/

The Observatory of Economic Complexity- Italy Profile- http://bit.ly/OECItaly

Italy Balance of Trade– http://bit.ly/2Wd80SZ

Balance of Trade (BOT)- https://bit.ly/BalanceOT

Italy- Market Overview- http://bit.ly/2xHG7Zj

EU Position in World Trade- http://bit.ly/2U4RxxK

Global Trade Impact of the Coronavirus Epidemic- https://bit.ly/Covid-19Trade

If the Coronavirus leads to another financial crisis, it might start in Italy- https://wapo.st/2wafEmt

How could Coronavirus impact Italy’s economy?- https://bit.ly/C19IE