Italy approves new stimulus package to help virus-hit economy

Girls wearing face masks walk past a sculpture by Canadian Artist Timothy Schmalz outside Santo Spirito hospital in Rome, Sunday, Oct. 18, 2020. (AP)
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Updated 19 October 2020

Italy approves new stimulus package to help virus-hit economy

  • Among measures to support the health and education system, the government will set up a €4 billion ($4.7 billion) fund to compensate companies worst hit by coronavirus lockdowns

MILAN: Italy has approved a new stimulus package in its 2021 budget to foster an economic rebound from the recession caused by the coronavirus disease (COVID-19) pandemic, a government statement said on Sunday after a late-night Cabinet meeting.

The ruling coalition, led by the anti-establishment 5-Star Movement and center-left PD party, agreed on a preliminary version of the stimulus package, a government source said, leaving final details to be hammered out.

Among measures to support the health and education system, the government will set up a €4 billion ($4.7 billion) fund to compensate companies worst hit by coronavirus lockdowns.

The budget also extends temporary layoff schemes for companies with workers on furlough and offers tax breaks to support employment in the poor south of the country.

Italian Prime Minister Giuseppe Conte is expected on Sunday to also announce new measures to curb the steady spike in COVID-19 cases over recent weeks.

One of the European countries worst hit by the pandemic, Italy has forecast a 9 percent economic contraction for 2020 and a budget deficit equating to 10.8 percent of the country’s gross domestic product.

The expansionary package is expected to keep Italy’s deficit next year to 7 percent of economic output, up from a 5.7 percent forecast in April, reflecting the additional spending.

Italy has forecast economic growth of 6 percent in 2021.

Expansionary measures next year will total €40 billion, including cheap loans and grants from the European Union’s Recovery Fund, Gualtieri told lawmakers this month.


Oman’s bond market return a key test for reform path

Updated 21 October 2020

Oman’s bond market return a key test for reform path

  • After becoming ruler in January, Sultan Haitham made shaking up and modernising state finances a top priority

DUBAI: Oman’s return to the international bond market this week will be a test of its ability to convince investors that long-awaited fiscal reforms have started to put it on a sustainable financial footing.

Oman, rated below investment grade by all the major credit agencies, announced on Monday plans to issue bonds with maturities of three, seven and 12 years, in what would be its first global debt sale this year.

Sultan Haitham, who became Oman’s ruler in January, has made shaking up state finances one of his priorities.

But investors would like to see more concrete steps being taken and, after a further sovereign downgrade last week, may require the new bonds to offer a significant premium over the country’s existing debt.

“The new sultan has done some good things — rationalizing the number of ministries, the implementation of VAT, plans to generate additional tax revenues, and they still have sovereign assets,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.

“There is positive momentum but it will take time for that credibility to build.”

According to a bond prospectus, Oman has begun talks with some Gulf countries for financial support.

“I don’t think this will actually be taken into consideration by investors unless there is a tangible announcement from Gulf countries with a tangible support package,” said Zeina Rizk, executive fixed income director at Arqaam Capital.

Oman will likely price the new three-year bonds in the high 4 percent area, the seven-year tranche in the high 6 percent and the 12-year in the mid-to-high 7 percent area, implying a premium of at least 50 basis points (bps) over its existing curve, she said.

Two other investors, who did not wish to be named, said the paper could carry a 25 bps premium over existing secondary trading levels.

Sources have previously told Reuters Oman would target over $3 billion with the new deal.

“If they take $3 to 3.5 billion, you will have a market indigestion for Oman, and I’m sure people will ask to be compensated for this risk,” Rizk said.