Economy of Italy

By | April 29, 2022

According to cheeroutdoor, Italy is a highly developed country, one of the “seven” leaders of the modern world. In 2001, the share of its GDP in world production was 3.1%, exports of goods and services – 4.0%, population – 0.9% (in total production, exports and population of industrial countries – respectively 5.6; 4.0; 5.3). In 2002, Italian GDP, taking into account the purchasing value of currencies, was $1,438 billion, per capita – $25,000 (28th in the world ranking). In terms of competitiveness, it was in 39th place, behind all EU countries (World Economic Forum assessment).

During the post-war period, until the oil crisis of the 1970s, Italy was the second in terms of average annual growth rates of GDP and labor productivity among the leading countries of Europe (after Germany) and the fourth in the capitalist world (taking into account Japan and South Korea), and according to investment growth rate ranked seventh. The difficulties of subsequent years, and especially the restructuring of the socio-economic system that began in the 1990s, markedly reduced this dynamism. Average annual growth rates in 1994-2002 were below the average for the EU (1.9% versus 2.4%). The country’s foreign economic positions also deteriorated. Its share of the world market (in value added), which rose from 2.0 to 4.5% in 1950–80, fell again. In the field of trade in machinery and equipment, where Italy owns 9.6% of world exports, especially noticeable was the decline in its share in the export of cars and spare parts for them (from 3.6 to 3.0% over the past 5 years), electrical and precision equipment (from 2.1 to 1.8%). In terms of average annual growth in hourly labor productivity in the manufacturing industry, Italy also lagged behind other leading countries (0.9% versus 4.5% in the US, 4.6% in France over the same years).

A distinctive feature of the Italian economy is the sharp inter-regional differences in the level of development and well-being. Production per capita in the South is approx. 60% of the rest of the country, the gap between the regions reaches 2.2 times (Emilia Romagna – Calabria); in terms of infrastructure provision, it is even greater – 4.2 times (Liguria – Apulia). The unemployment rate in the North is 4.0% (female – 5.8%), in the South – 18.3% (female – 26.4%). OK. 40% of those employed in agriculture in the South and about 30% in construction work in the informal sector.

In the structure of GDP (% value added), the share of industry is 25.8 (including manufacturing – 22.8), agriculture – 3.2, construction – 5.5, services – 65.5. In the structure of employment, they occupy respectively 21.7 (21.0); 5.5; 6.9; 65.9. The scale of the shadow economy is estimated at 25-30% of GDP. Informal labor activity covers 20% of the able-bodied population. Its most common type is part-time work – officially declared (about 1 million people) or unofficial, especially widely represented by part-time employment in agriculture (about 7 million). In the South, the basis of the well-being of a certain part of the population is the criminal business. OK. 3% of the working population are immigrants.

The ratio between the number of employed and working-age population in Italy is the lowest in the EU (55.2% vs. 64.2%), especially in the female segment (41.9% vs. 55.5%). Unemployment is 9.0% of the active population versus 7.6% in the EU. It is especially noticeable in the women’s segment, where it reaches 31.4% in the 15-24 age group. The employment structure differs from the European average by a high proportion of “independent” workers (27.4% versus 15.6%). Significantly less than the EU average, such forms of employment as part-time work (8.6% of the total number of employees against 18.1%) and temporary contracts (9.9% against 13.0%) are used.

Italy is one of the top four European producers of steel and ferroalloys, electricity, cement and other major heavy industry products. It is one of the world leaders in the automotive industry (more than 1 million cars per year). Italy occupies strong export positions in the production of consumer durables, office equipment and computer equipment, machinery and equipment for plastic processing, textile, footwear, food and printing industries. At the same time, it is one of the world’s leading suppliers of light industry products: textiles and clothing, footwear, ceramics, etc. In terms of shoe production (more than 400 million pairs per year), it is second only to the United States. Many Italian companies dominate the global ready-to-wear markets. An important export industry is design, bringing the country approx. 10 billion dollars a year.

The energy and raw material base of the industry is provided mainly by imports. Imported approx. 90% oil, almost all coking coal, more than 90% iron ore, 2/3 manganese ore, and alloy metal ores. In the structure of electricity generation, 78% is accounted for by thermal power plants, 20.2% – by hydroelectric power plants, 1.6% – by geothermal sources, 0.4% – by the use of wind energy; 16% of electricity is imported. The North has 71.2% of the installed capacity of HPPs and 44.4% of TPPs.

A feature of the Italian industrial structure is that there are few large TNCs in the country and small and medium-sized enterprises (SMEs) absolutely predominate. Among the world’s top 500 TNCs in 2001, there were only 8 Italian ones, the first of which, FIAT, ranked 49th, and the eighth, food flavor Edison, ranked 353rd. Only three Italian companies were among the top 50 European TNCs, and FIAT was only in 17th place. In the world industry ranking, the positions of Italian big business were more impressive: Edison was in 2nd place, FIAT and the oil refinery ENI were in 7th, telecommunications Olivetti were in 10th. In addition, Italian big capital is noticeable in the insurance business and in the banking sector. The wide presence of Italian business in foreign markets is largely ensured by the activities of medium and small companies,

Enterprises with up to 10 employees accounts for 94.8%, up to 20 people. — 98.0% of the production units operating in the country, employing 250 people. and more – 0.1%. The average size of enterprises according to this indicator is twice lower than in the EU. The stratum of large enterprises (more than 500 people) concentrates less than 15% of the employed (against 40% in France and 50% in Great Britain). The trend towards dispersal of production is increasing: in 1991-2001, the average number of employees at the enterprise decreased from 6.7 to 6.3 people.

Small and medium-sized enterprises form the basis of industrial districts (clusters) – territorial production complexes typical of the North and the Center, functioning on the basis of specialization and cooperation in the sectors of production that make up Italy’s international specialization. In districts, which are approx. 200, almost 45% of those employed in industry are concentrated; they account for more than 40% of national exports. Many districts send abroad from 1/3 to 2/3 of their products, and some even more. For example, the Prato district (85,000 enterprises with 44,000 employees) exports 66% of its textile and ready-to-wear production; it alone provides 10-11% of this article of national export. The district of Montebelluna (416 enterprises with 8.8 thousand employees) exports 73% of its production of sports shoes. The active role of SMEs in promoting national products to foreign markets is a feature of the Italian economy. There are also districts specializing in tourism, of which there are approx. 300.

In the districts, thanks to the concentration of technical experience, information, personnel, financial resources (local savings and small banks) and production capacities, there is a continuous (“increasing”) process of updating and diversifying products. According to a study conducted in 2001 by the EU Commission, Italy leads in terms of the intensity of this process (new products accounted for 13.5% of annual sales compared to 6.5% on average for the EU). Thanks to the specifics of its innovative model, Italy manages to maintain its status as a global supplier of not only many types of consumer products, but also modern industrial equipment of a medium technological level.

In the structure of agricultural production, agricultural products account for 95.4%, forestry – 1.2%, fisheries – 3.4%. Italy is one of the world leaders in the production of “Mediterranean” types of products – olive oil, wine, subtropical fruits and vegetables. Grain farming and animal husbandry are less developed. Highly productive agricultural production is concentrated in the North, where modern technology and agriculture are used on irrigated areas. In other areas, irrigation is insufficient, and soil erosion is observed in places.

The usable area is 20.2 million hectares, 74.4% is actually used, crops occupy 41.6%. 16.4% of households specialize in grain production, and 26.0% together with other types of crops. On the irrigated lands of the Padan plain, rice is grown, in terms of the yield of which Italy is among the world leaders. Grain harvest in 2000 amounted to 20.6 million tons, incl. wheat – 7.5 million tons. The production of “Mediterranean” crops employs 47.4% of farms, mainly in the South. 2.3% of households specialize in dairy farming, 1.0% in meat farming (both directions are typical for the North), and 4.9% in sheep and goat breeding (South). Mixed specialization has 10.2% of households.

According to the 1990 census, 95.7% of land owners, who accounted for 70.3% of the area used, cultivated it without hiring labor. 3.9% of the owners who used hired labor accounted for 29.1% of the used area.

Italy has a dense network of standard gauge railways with a total length of 19.8 thousand km, of which 60% is electrified, and 1.0 thousand km of narrow gauge railways. The network of paved highways has a length of 668.7 thousand km, incl. 6.5 thousand km of highways. The car park has 40 million units (over 32 million – cars, 2000). A small network of inland waterways serves goods traffic. Pipelines provide transportation of natural gas (length – 19.4 thousand km), oil products (2.2 thousand km) and crude oil (1.7 thousand km). Air transport has 135 airports, incl. international – in Rome, Milan, Naples, Bologna, Genoa, Pisa, Turin and Venice. The merchant fleet has 467 large ships with a total tonnage of 8499.3 thousand tons, of which 62 are foreign under the Italian flag.

In 2000, 82.2 million tons of cargo and 431.5 million passengers were transported by rail. Freight turnover amounted to 23.8 million tkm and 431.5 million passengers/km. It was transported by sea: under the Italian flag – 154.6 million tons of cargo and 79.8 million passengers, under a foreign flag – 308.5 million tons of cargo and 5.7 million passengers. Air transport transported 90.0 million passengers. National airports accepted 605.4 thousand flights, passed 45.0 million passengers in transit, unloaded 2454.0 thousand tons of cargo and 511.1 thousand tons of mail, sent 3060.1 thousand tons of cargo and 512.8 thousand tons of mail.

The telephone network is served by three communication satellites and 21 submarine cable lines. Television broadcasting is carried out by 358 stations. There are 93 providers on the Internet, the number of users is 19.2 million people.

In the sectoral structure of the service sector, the article “trade, craft and supply of household goods” is in the first place. The contribution of this sector to GDP is 14.8%, the share in total employment is 15.2%. The share of trade (wholesale, commission, retail) in 1998 accounted for approx. 40% of the total number of employed in the service sector, approx. 55% of the sales turnover of this sector and 1/3 of the added value. The ratio of wholesale (together with commission) and retail trade in terms of sales was 1.5:1. The retail trade network consisted of 636.5 thousand points in 2001, of which 39.8% in the North, 20.6% in the Center and 30.6% in the South. Enterprises of the traditional, “family” or individual type, specialized in the sale of a certain type of goods, predominate. On average, there are 8 specialized and 0.04 non-specialized retail outlets per 1,000 population. The average number of employees at a retail trade enterprise is 2.4 people. In 2000, there were 6.2 thousand supermarkets and 301 hypermarkets in the country.

Italy is one of the leading countries in international tourism (4th place). The revenues of this industry in 2002 amounted to 10.4 billion euros. Domestic tourism is also well developed. In 2000, in terms of the number of overnight stays of collective resident tourists per 100,000 population (338), India was far ahead of the EU average (297).

Large sectors of the service sector are also financial intermediation (contribution to GDP – 6.9%, share in employment – 2.6%), health care and related public services (respectively 5.1 and 5.6%), public administration activities (5.5 and 6.6%). The share of “various services to enterprises and individuals” accounts for 11.1% and 10.8%, respectively.

Economic and social policy of Italy from the beginning. 1990s is built on the basis of structural reforms aimed at modernizing the economy and the social sphere within the general framework of deepening the process of European integration and harmonizing national legislation with EMU standards. The key directions of this new course were the privatization of a significant part of the public sector and budgetary and financial stabilization, which combined a number of institutional transformations – reforms of the tax and pension systems, the labor market, the banking system and the stock exchange, the administrative apparatus, and regional management. Part of the funds received from privatization was supposed to be used to pay off the huge public debt.

The privatization program, designed for a number of years, included the corporatization of the main state holdings of IRI and ENI, leading institutions and financial institutions of public law, and several state monopolies. The form and terms were determined in relation to each object. More than 30 largest industrial and service enterprises, leading banks have been privatized. In a number of cases, the state retained its “golden share”. In 1994-2000, treasury revenues from privatization amounted to 122 trillion liras (about 6% of GDP).

To improve the financial situation, a budgetary maneuver was carried out, which included cutting a number of expenditure items and emergency tax measures (including the “European tax” on company assets). The procedure for spending budgetary funds on the economy of the South was revised, where it is supposed to use the proceeds from EU structural funds more efficiently. Thanks to these efforts and proceeds from the privatization of Italy, it was possible relatively quickly, in 1992-98, to reduce the budget deficit from 12.1 to 2.8% of GDP, and the inflation rate to less than 2%. This gave the partner countries grounds to agree to the country’s accession to the EMU already in the “first wave”, from January 1999.

The medium-term budget policy is aimed at eliminating the deficit, gradually reducing the tax burden and increasing investment in infrastructure. The program for 2002-06 contains a two-year investment incentive tax cut scheme (already proven effective in 1994-96): 50% of investment spending above the average of the preceding 5 years can be deducted from taxable income. Measures to ease the tax burden, fixed in the next “social contract”, include a reduction in income and corporate taxes, as well as social contributions on the regional tax on production activities. The government of S. Berlusconi focuses on the use of modern methods of managing state assets (the value of which is estimated at no less than 1.3 trillion euros), attracting non-partisan technocrats to leadership positions in the public sector. Efforts are being made to return from abroad capital exported in violation of currency and tax laws (their volume reaches 40-50 billion euros).

In parallel, labor market reform was launched. It included wage containment agreed with the unions in exchange for medium-term measures by the authorities and business to expand employment. Since 1993, these “social contracts” have been regularly renegotiated and introduced as an integral part of medium-term “rolling” budget programs. A set of measures that expand the scope of employment includes: wider use of “non-standard” employment – apprenticeship, part-time work, temporary employment; admission to the sphere of hiring private agencies (until recently it was in the hands of the state); in problem areas – agreements between social partners and local authorities to create new jobs. Attempts are being made to “bring to light” at least part of the shadow employment, but so far they have not yielded tangible results.

An important direction of the reform policy was the revision of the pension system, which absorbed approx. 80% of the cost of social security and accumulated a huge deficit. Legislation of 1995-97 aimed at streamlining the existing, rather “variegated” pension regime (eliminating a number of privileges) and a gradual transition from a pay-as-you-go system to a funded system, as well as a gradual reduction in the retirement age. The creation of private pension funds has begun, to which, according to existing projects, up to 2/3 of the working population will go in the future.

The new course also provides for an administrative reform aimed at reducing staff, eliminating duplicative structures and improving the quality of services, incl. by transferring the management process to a computer basis (“electronic government”).

The reform of the monetary system began with the “divorce” in 1981 of the Central Bank (CB) and the Treasury, which meant the abandonment of the previously existing procedure for automatically financing the growth of public debt as part of the policy of budgetary support for priority areas and industries. In 1993, the Central Bank received an independent status. The legislation of 1993 and 1998 liberalized the monetary sphere, which had been nationalized in 1936, by transferring banking activity to an entrepreneurial basis and eliminating the administratively established segmentation of the financial services market. Specialized credit institutions of public law, engaged in long-term lending, were transformed into JSCs with the sale of 49% of their capital on the open market; commercial banks were now allowed to own shares in non-financial enterprises and be represented on their administrative boards. The key models of the new structure were a universal bank and a diversified financial group. The reform also retained the status of a cooperative bank in both of its forms – the people’s bank and the cooperative credit bank (the latter serves the rural environment and handicrafts). The activities of other financial intermediaries – investment funds, securities companies, factoring companies, etc. – were also liberalized. The reform also retained the status of a cooperative bank in both of its forms – the people’s bank and the cooperative credit bank (the latter serves the rural environment and handicrafts). The activities of other financial intermediaries – investment funds, securities companies, factoring companies, etc. – were also liberalized. The reform also retained the status of a cooperative bank in both of its forms – the people’s bank and the cooperative credit bank (the latter serves the rural environment and handicrafts). The activities of other financial intermediaries – investment funds, securities companies, factoring companies, etc. – were also liberalized.

In 2002, there were 814 institutions in the Italian banking system, incl. 253 joint-stock banks, 60 foreign branches, 40 people’s banks and 461 cooperative credit banks. In terms of the scale of operations, banks of national importance (65.5% of total capital and reserves), interregional (10.3%), regional (14.3%) and interprovincial and provincial (9.9%) banks were distinguished. The share of these categories in the total assets of the banking system was respectively (%): 65.1; 10.6; 14.5 and 9.7; in the total amount of attracted capital – 57.0; 13.1; 17.2 and 12.7. Local banks thus play a large role in this system, accumulating up to 30% of savings. The share of branches of foreign banks in total assets is 5.1%.

The reform contributed to the concentration of Italian banking capital and the strengthening of its international positions. During 1993-2002, hundreds of mergers and acquisitions were carried out, covering more than 50% of the assets of the banking system. The top 5 groups account for 54% of the banking services market (against 60% on average in Western Europe). The structure of ownership of banking capital has changed: more than 60% of it, compared to 30% in 1992, is listed on the stock exchange, the number of shareholders has reached 2 million people. The high savings rate in the country (on average for the 1990s – 20.7%) creates the preconditions for a further increase in the potential of the monetary system.

Its weak point, due to the specifics of the corporate structure, lies in the insufficient development of the stock exchange. The total capitalization of the 4 stock exchanges available in the country (in Milan, Rome, Turin and Genoa) is equivalent to 70% of GDP, while the London Stock Exchange alone is 150% of GDP. Most Italian entrepreneurs avoid going public. In 2002, there were only 265 listed companies, while 4.5 times more of them objectively satisfied the requirements of the quotation. The sphere of consumer credit is also relatively underdeveloped in Italy, the volume of operations of which is equivalent to 3% of GDP (against 8% on average for the euro area).

In 2002, 44.9% of GDP passed through the consolidated state budget in its revenue side, and 47.2% in its expenditure side. Revenues amounted to 551.4 billion euros, incl. direct taxes – 31.4%, indirect – 32.5%, social contributions – 28.2%. Spending reached 594.3 billion euros, the deficit increased by 29.1 billion and amounted to 2.3% of GDP. The main income items were income tax (36.8% of total revenues) and VAT (29.0%), expenses – transfers to state institutions (34.7%), staff maintenance (22.0%) and payment of interest on debt (20. 3%).

13.9% of GDP passed through the regional and local budgets in their revenue side, and 14.5% in the expenditure side. Revenues amounted to 182.6 billion euros, including: direct taxes – 12.4%, indirect – 33.3%, transfers – 33.4%. Expenses reached 182.6 billion euros, including: staffing – 30.9%, intermediate consumption – 24.4%, purchase of social services – 17.8%. The deficit increased by 7.9 billion euros and amounted to 0.6% of GDP.

The relationship between the federal and local budgets, regulated by the 1999 law on budget reform, is expected to be substantially restructured. Starting from 2001, budget transfers to the regions are being replaced by the transfer of a larger share of tax revenues (from VAT, income tax and gasoline tax) to them, as well as an increase in the base rate of the regional personal income tax (from 0.5 to 0.9%). The total increase in revenues to regional and local budgets (about 27.5 billion euros) was planned to be divided “taking into account the historical level of consumption.” In the future, the criteria for the redistribution of funds will be revised based on a combination of criteria: population size, tax base, per capita spending on health care, etc. – in order to equalize the existing gap, for which a special fund is being created. Obviously,

The size of the public debt in 2002 decreased to 106.7% of GDP (against 123.7% in 1995), which made it possible to significantly reduce the volume of interest payments. More than 1/3 of the debt falls on budgetary transfers to the social security system.

Italy is one of the countries with a relatively high standard of living. However, the gap in welfare levels between the “top” and “bottom” 10% of the population is large – they account for 26.6 and 2.1% of the national income, respectively. This contrast is especially noticeable in the distribution of property: 47.1% of real estate, valuable property and securities are concentrated in the hands of the 10% of the richest families. 12% of families and 13.9% of the total population live below the poverty line (2001).

The average annual disposable income of a family in the North is 30.7 thousand euros, in the South – 19.4 thousand euros (2000). The number of poor families in the North does not exceed 5%, in the South it is 20%. More than 1/3 of poor families in the South have many children.

Expenses for food take 18.6% of the average family budget and do not vary much by region (16.6% in the North and 23.0% in the South). The majority of Italians (72.1%) are homeowners, this figure is almost the same in all areas. More than 70% of Italian families have no savings or they are small. Among employed and “independent” workers, 28-29% have savings. 6% of families receive income from property ownership.

Approx. 25% of GDP I. In 2002, the current account balance of payments was negative (-7.3 billion euros). It was formed as a result of combining a positive balance in trade in goods (17.3 billion) with a negative balance in trade in services (-3.7 billion), income movements (-15.4 billion) and transfers (-5.6 billion). The balance of capital movements was positive (0.8 billion euros), mainly due to transfers (1.0 billion). The balance of financial settlements was also positive, as deficits in direct investment (-2.7 billion euros), derivatives (-2.7 billion) and changes in official reserves (-3.1 billion) were offset by positive portfolio investment balances (16. 1 billion) and other investments (1.0 billion).

The positive balance of foreign trade in 2002 amounted to 9.3 billion euros (exports – 267.8 billion, imports – 258.5 billion). In the geographical structure of foreign trade, approx. 70% of exports and imports come from OECD countries, incl. on the EU (52.5% for exports and 56.3% for imports) and the USA (9.7 and 4.8%, respectively). The Russian Federation, China and the countries of Central and Eastern Europe accounted for 11.6% of exports and 13.6% of imports, OPEC countries – 4.1 and 6.1%, respectively, other countries – 14.7 and 11.4%. In the commodity structure of foreign trade, approximately the same position is occupied by consumer goods – 34.8% of exports and 25.4% of imports (including durable goods – 10.1 and 4.0%, respectively) and machinery and equipment – 32.6% of exports and 29.6% of imports. Semi-finished products accounted for 30.0% of exports and 32.4% of imports, energy products – respectively .

Economy of Italy