Italy has the world’s third-largest national debt, which runs at more than 1.3 times the country’s domestic output. The performance of the economy is important for the sustainability of the public debt.

Measures to counter the spread of the new coronavirus that first emerged in China could have a significant impact on the Italian economy, adding to the marked negative risks to growth projections, the Bank of Italy said.

The International Monetary Fund said last week that Italy’s public debt is at record highs and will remain around record highs in coming years and then rise.

Italy’s central bank is trying to assess the epidemic’s impact on the domestic economy but this is difficult to do due to uncertainty over how long the effects will last, governor Ignazio Visco told the annual Assiom-Forex conference of Italian financial market participants.

“The impact could be temporary and limited for both the European and the Italian economy to a few decimal of a percentage point in terms of lower growth in the aggregate demand,” he said. “But a more significant impact cannot be ruled out,” he added. Visco stressed that China’s presence in the global economy was now much bigger than at the time of the SARS outbreak in 2002-2003 - China’s contribution to global gross domestic product has quadrupled since then.

He also noted the risk of “a small de-globalisation”, with people moving around less because of contagion fears and uncertainty over future demand holding back investments.

Visco said an information campaign would be key to avoiding unwarranted reactions.

Reuters