Forecasted inflation rate in Italy 2020-2022

According to data published in May 2021, consumer price inflation in Italy is expected to increase by 1.4 percent in 2021. According to the source, base effects related to the increase in the oil prices push the inflation to grow in 2021. Eventually, it reaches 1.2 percent in 2022. In addition, the labor market slack in the country puts downward pressure on inflation.

Changes in consumption

In 2020, consumer price inflation decreased below zero. In this scenario, a change in consumers' behavior followed. Prices might decrease but the purchasing power is not necessarily going to rise. When the unemployment rate rises and salaries drop, purchasing power decreases. Indeed, the unemployment rate in Italy stood at 9.2 percent in 2020 and is expected to rise in 2021. In an uncertain economic situation, people tend to spend less money. This can be seen in the development of the savings rate of Italian households.

Impact of COVID-19

Italy's economy was particularly hit by the coronavirus pandemic. Italy's GDP dropped by 8.9 percent in 2020, according to data published in 2021. In 2021 and 2022, the GDP could experience an increase by over four percent. An economic outlook published in December 2019 had originally forecasted a slight growth in Italy’s GDP for 2020. However, these estimations could not have taken into account the economic impact COVID-19 pandemic.