guarantees made available by the state are making it possible to meet firms ’ demand for emergency funding. in the two months march and april, lending to non - financial corporations increased by €22 billion, after decreasing by €9 billion in the previous 10 months ; annualized growth was equal to almost 17 per cent ( figure 6 ). while indispensable, support measures for firms that focus on bank lending could destabilize their financial structure, increasing their indebtedness to an excessive degree. the government has enacted measures to facilitate the governor ’ s concluding remarks annual report 2019 banca d ’ italia the capital strengthening of firms. tax incentives have been introduced for medium - sized enterprises to help both firms making capital increases by the end of 2020 and those subscribing them. the largest firms will benefit from direct forms of public support via the cassa depositi e prestiti. the timing and strength of the recovery that will follow the emergency phase depend on factors that are hard to predict. in mid - may, we presented a scenario analysis for the italian economy based on alternative hypotheses on the duration and extent of the epidemic, its impact on the global economy and its financial repercussions. the estimates will be updated as part of the eurosystem staff macroeconomic projection exercise and will be published on 5 june. in the baseline scenario, the fall in production in 2020 would be equal to 9 per cent, greater than that suffered at two different times between 2008 and 2013 ; the drop would be concentrated in the first two quarters of the year, with a partial recovery starting in the summer ( figure 7 ). without the support for demand provided by the fiscal policies set out so far, the contraction in economic activity would exceed 11 per cent. debt moratoriums and public guarantees on new loans to firms drastically reduce the risk of further amplificatory effects due to a widespread liquidity crisis. in 2021, gdp would recoup about half of the fall. these estimates assume that the containment of contagion at national and global level will continue. a second scenario based on more pessimistic, though not extreme, assumptions regarding the evolution of the epidemic, the magnitude of the drop in world trade and the intensity of the deterioration in financial conditions, would see gdp fall by 13 per cent this year, and a much slower recovery in 2021. in both scenarios, about half of the fall in gdp would be due to the restrictions connected with the

. note : total assets, not including gold, as a percentage of gdp in 2019. data at 22 may 2020. banca d ’ italia the governor ’ s concluding remarks annual report 2019 figure 3 inflation expectations in the euro area ( per cent ) 1. 5 10 - year 1. 5 0. 5 0. 5 - 0. 5 - 0. 5 1 - year - 1 - 1 source : bloomberg. note : inflation swap rates. data at 26 may 2020. figure 4 sovereign spreads ( basis points ) portugal italy spain france source : based on bloomberg data. note : yield spreads between the ten - year government bonds and the corresponding german bund. data at 26 may 2020. the governor ’ s concluding remarks annual report 2019 banca d ’ italia figure 5 discretionary budgetary measures in response to the epidemic ( per cent of gdp ) germany france italy netherlands spain euro area sources : the european commission for the euro area and the netherlands ; national stability programmes for germany, france, italy and spain ( april 2020 ). note : increase in general government net borrowing in 2020 following the measures adopted in response to the epidemic. figure 6 growth in bank lending to firms in italy ( 12 - month percentage change ) - 2 - 2 - 4 - 4 - 6 - 6 source : supervisory reports. note : updated to april 2020. banca d ’ italia the governor ’ s concluding remarks annual report 2019 figure 7 level of gdp in italy : scenario analysis ( 2006 = 100 ) baseline scenario adverse scenario sources : based on istat data. for the scenarios for 2020 - 21, banca d ’ italia, note covid - 19, 15 may 2020. figure 8 public and private debt ( per cent of gdp ) private public it fr de nl es euro area it fr de nl es euro area sources : based on data from banca d ’ italia, ecb, european commission, eurostat and istat. note : end - 2019 data. private debt : households ’ and firms ’ financial debt. the governor ’ s concluding remarks annual report 2019 banca d ’ italia figure 9 long - term scenario for gdp and labour productivity in italy ( 1980 = 100 ) gdp labour productivity source : based on istat data. note : assessment horizon of the long - term scenario : 2020 - 35. figure 10 long - term scenario for investment in italy ( 1980 = 100 ) % investment investment - to - gdp ratio ( right - hand scale ) source : based on istat data. note :