Abstract

The objective of this group action learning project is to meet the requirement of the subject. The
essay will discuss the consequences and effects of the pandemic from an economic perspective and
how it defers to another previous world economic crisis. It will also discuss strategies and policies to
overcome the economic downturn due to the impact of the virus and how the virus and its political
responses affect income and healthcare inequalities. The essay will also add prediction states of the
economy and a glimpse of how our current company will be in the next five years.

Introduction

In December 2019, the world was shocked to face a deadly Coronavirus disease. It is an infectious
illness caused by a novel coronavirus called severe acute respiratory syndrome coronavirus 2 (SARS-
CoV-2) and was termed COVID -19 as the acronym was derived from coronavirus disease 2019.
COVID-19 is a global epidemic that has impacted the economic and financial crisis. Lockdowns and
social distancing were enforced in most countries. The Great Lockdown, labelled by the International
Monetary Fund (IMF), was the mother of all crises and eventually gave a massive meaning, a global
economic downturn.

What are the effects of COVID-19, and how are they different from other economic crises, such as
the Global Financial Crisis of 2017 and the Asian Economic Crisis of 1997? 

The COVID-19 pandemic has had severe economic consequences for Italy, as it has for many other
countries worldwide. The pandemic particularly hard-hit Italy due to its close economic and cultural
ties with China, where the virus first emerged, and the country's relatively high proportion of older
citizens, who are more vulnerable to severe illness from COVID-19.

The economic effects of the COVID-19 pandemic on Italy have been multifaceted. The country has
experienced a significant decrease in tourism which, by certain estimates, represents 13% of Italian
GDP and other forms of international travel, which had a negative impact on many sectors of the
economy, including transportation, accommodation, and leisure. It disrupted global supply chains,
production, and export of Italian goods.

Based on the analysis conducted by ENIT, the Italian national tourism agency, since February 2020,
international tourists have decreased by 58% and domestic travellers by 31%, with an estimated
economic loss of Euro 24.6 billion. In addition to these direct economic effects, the COVID-19
pandemic has also led to a significant increase in government spending on unemployment benefits
and support for businesses affected by lockdowns and other public health measures.

It has put pressure on the country's public finances and has contributed to a rise in public debt.  
The economic effects of the COVID-19 pandemic on Italy have been more severe than those of the
Global Financial Crisis of 2007-2008 and the Asian Economic Crisis of 1997. The pandemic has had a
more widespread and immediate impact on the economy, including social and health impacts,
further exacerbating its economic consequences.

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What medium-term effects might this virus have? What long-term effects could it have?  

The evolution of the pandemic and the success of public health interventions and economic policies
will greatly impact Italy's economic trajectory. The epidemic will undoubtedly continue to affect
Italy's economy in the medium term as the country faces a public health catastrophe and economic
upheaval.

The epidemic could cause medium-term economic issues. Lockdowns and travel restrictions have
resulted in employment losses and business closures. Full economic recovery may take time. Travel
restrictions and consumer behaviour changes may continue hurting Italy's tourism business.
Medium-term pandemic effects may potentially impair healthcare. The initial outbreak may cause
hospitals and healthcare staff to rely more on telemedicine and remote monitoring. The pandemic
may also impact how the healthcare system is organized and supported.

Medium-term social and psychological impacts are possible. The outbreak's disruptions, stress, and
fear may affect mental health. The pandemic may also impact social norms and behaviours, such as
cleanliness, communication, and work technologies. Long-term implications of COVID-19 on Italy's
economy depend on how well the country recovers from the crisis and rebuilds.

Suppose the pandemic reduces international travel and tourism. Businesses in these sectors and the
economy could be hurt. The epidemic could have long-term economic implications if it impacts
consumer or corporate behaviour. It is important to note that the medium-term and long-term
effects of the COVID-19 pandemic on Italy will depend on a variety of factors, including the success
of efforts to contain the virus, the effectiveness of economic policies implemented in response to the
crisis, and the resilience of the country's businesses and workforce.

Strategies to Reopen the Economy While Minimizing the Health Risks

Most countries have put Covid-19 under partial or complete lockdown. Only important firms were
allowed to operate during the shutdown, which hurt the economy. To control infection, officials
must reopen the economy. Most countries have reopened with strict WHO-based safety measures.
More non-critical sector businesses. New safety standards affect Italy's industrial and construction
industries (e.g., staggered shifts, spaced workstations, temperature checks, and masks).

Controlling infections will help reopen the economy. Public meetings are still banned, although
home-based industries are encouraged. Most governments opt for region/sector-based lockdowns
instead of nationwide lockdowns. On Covid-19's second wave, the Italian government adopted a
risk-based, region-based limitation strategy. It separated the country into three zones with different
restrictions, reducing economic harm and improving pandemic management. The Italy government
also limited the capacity of closed areas such as theatres, cinemas, and concert halls to 50%.

Traditional Monetary and Fiscal Policy: Future Waves of Infections

Before discussing the efficiency of standard monetary and fiscal approaches to overcome Covid-19's
economic crisis, we need to define fiscal and monetary policy. Government spending and tax policies
influence macroeconomic conditions. Monetary policy is a set of tools a country's central bank uses
to control the money supply, stimulate economic growth, and change interest rates and reserve
requirements. To keep the discussion simple and streamlined, we shall take the fiscal and monetary
policies employed by the Italy Government and Bank of Italy.

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Fiscal Policy

The Italian government's fiscal policies promise 750 billion euros (almost 50% of GDP) in liquidity
programs for firms and consumers. Some highlights of these fiscal policies are funds allocated for
improving the Health Care System and Civil Protection, preserving jobs, a firing ban, short-time work
schemes, financial support for the laid-off worker, income support for covid-19 affected families,
compensation for business and self-employed individuals, suspension on social security contribution
for new hires, tax deferrals, grants, and postponement of utility bill payments for affected
businesses.

Monetary Policy

Italy's monetary policies include loan repayment moratoriums for SMEs and selected households
and Deferred Tax Activities for financial and non-financial enterprises. SME Cash Strengthening
Scheme, Relaunch Fund, Fund for Start-Ups and Innovative SMEs, and National Tourism Fund have
been launched to inject capital into firms hit by the pandemic. Bank of Italy has also announced a
range of steps to support intermediaries, including temporarily allowing them to operate below
certain capital and liquidity criteria and delaying on-site inspections.

Based on the preceding fiscal and monetary policies, we believe they have softened Covid-19's blow.
Without the policies above, Italy's economy and citizens' livelihood would be in danger. Italy's
handling of Covid 19 at the start of the epidemic, the government's delay in developing
countermeasures, and the healthcare system's ability and competencies need improvement. If
another virus epidemic hits Italy, similar policies can be used. Before implementing any policies,
another round of study and research must be done to assess their viability. A region/sector-based
shutdown might operate better than a worldwide lockdown to avert an economic standstill.

Political Responses that Affect Income and Healthcare Inequalities

Italy was hit hard by the coronavirus in 2019. (COVID-19). Italian healthcare isn't ready for the
epidemic. After 20 years of underinvestment, during which public hospitals were drastically reduced,
the sector was stressed.

COVID-19 has devastated health systems, supply chains, and the global economy, affecting
individuals and families. People who lost their jobs and are destitute were more affected by the
outbreak than relatively well-off people. It is predictable, given that the virus affected many areas
through labour market disengagement and lockdowns. Italy is highly decentralized, so it has
centralized policy direction and decision-making.

This dire situation is the result of a complex combination of factors such as inadequate tools to
communicate the risk to the population, political considerations of infringing on individuals' right to
liberty, a deceptive impression of safety, the initial reluctance of the government to implement
encircling containment, and, most importantly, individuals' failure to comply with any preventative
or control measures. Significantly, like any pandemic, a delayed response due to unpreparedness
and political biases has inevitably worsened an already difficult situation.

Rich Italians have unequal access to specialists and hospitalization. In April 2020, the virus infiltrated
nursing facilities (more than 1,000 in the Piedmont Region), leaving residents unprepared to combat
its spread. Certain regions are unsafe because of poor healthcare systems, not because of positive

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test results or deaths. Patients were less likely to locate a free hospital bed and treatment in an
emergency.

Rich and poor have always had vastly different life expectancies and death rates. The epidemic has
exacerbated economic inequities by reducing Italian households' income, causing difficulty in getting
basic needs. Increased poverty has fuelled a food problem. In response to this calamity, the
government expanded financing for the healthcare system and vulnerable populations by offering
financial aid to low-income groups, students, and the unemployed.

Many efforts have been taken to address income and healthcare inequalities, most notably the
"Cure Italy Decree" which focused on benefitting working parents. This policy provided guaranteed
payment, tax suspension, and emergency income to needy families and eliminated a planned
increase in VAT and excise duty.

Geopolitical Consequences of COVID-19

Geopolitics is international relations influenced by factors such as demography, economics and

Numerous EU countries, including founding member Germany, have outlawed the free movement of
people and goods due to hampered international delivery of medical products, equipment, and
essentials. This political stance penalized everyone, notably Italy, affected hardest by the pandemic.
Internal geopolitics helps explain Italy's territorial authority-State clashes.

Italy had "6,000" ICUs before the pandemic. Globalization required importing masks from
underdeveloped countries. Italy and China signed an MoU in 2019 addressing Italy's participation in
the "Belt and Road Initiative" China is a major face mask provider. The EU rejected Italy's request for
CPM help. Many Italians feel abandoned, embarrassed, and tricked since the Czech Republic, France,
and Germany banned face mask exports. Italy's social media said China would save the country.
China's aid damaged European unity. The EU later sent Italy €50 million for medical equipment and
apologized for the delay. Italy's PPE comes from Germany, France, and Austria.

France and Germany supplied Italy with more face masks than China, the EU said in response to
Chinese propaganda. Huawei stopped giving Europe face masks after complaints. Huawei's goal is
seen as a tactic to advance China's geopolitical plan and convince European states to adopt Huawei's
IT equipment. Russia's Anti-COVID Assistance to Italy included military medics and experts in
biological, chemical, and radioactive hazards. It provided a Russian method for evaluating and
decontaminating soil and surfaces. No COVID-19-detecting equipment existed.

Worrisome was where Russian military experts cleared land and structures. Near "sensitive" US and
NATO nuclear bases. The Italian government abruptly ends the operation. COVID-19 was a
geopolitical manoeuvre, a domestic political consensus initiative, and a healthcare intelligence
operation.

The economy in 5 years

The COVID-19 pandemic has short-term macroeconomic implications; however, they may be
temporary, with growth returning to pre-crisis levels within a decade. In each pandemic, widespread
mortality resulted in rapid and dramatic changes in population density and age structure, influencing

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factor prices and labour markets. According to research by De Backer et al. (2020), the form of
recovery in numerous nations will most likely be between a U and an L, with considerable and
prolonged potential losses. In Figure 1, the V-shaped recovery reflects a rapid recovery following the
recession, the U-shaped recovery represents a slower recovery, and the L-shaped recovery
represents GDP that has not recovered. Consequently, the solid condition of the financial market
suggests that an interest rate environment with low rates for an extended period is priced.

HSBC has started its cryptocurrency, an internet-based digital currency that will be the alternative
form of fund transactions and is created using encryption algorithms. The new way of transacting
funds will be a permanent solution to regain business since many customers are affected by the
virus. It is a brilliant move since the pandemic has shaped a new perception of interaction and
making business.

Conclusion

COVID-19 has affected the well-being and economy globally. The result of COVID-19 is the huge
number of virus deaths, a high unemployment rate and people confined to staying at home.
Prevention measures were addressed and implemented; however, the drop in economic
performance globally is not solely due to the lockdown policies but the virus itself. Post-coronavirus
is forecasted will not be the same as before the virus emerged.

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APENDIX

Figure 1 Potential Shapes of the recovery1

1
De Backer, B., Dewachter, H., & Iania, L. (2021). Macrofinancial information on the post-COVID-19 economic
recovery: Will it be V, U or L-shaped?. Finance Research Letters, 43, 101978.

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