Content source : Istat
In terms of the different sectors, manufacturing products largely dominate exports since they represent 95% of the total value. In 2023, exports were boosted in particular by sales of machinery and equipment (€101.1 billion, +8.8%), pharmaceutical products (€49.1 billion, +3.0%), vehicles (€45.8 billion, +15.0%) and food, beverage, and tobacco products (+5.8%). Lombardy is the largest exporting region (€163.2 billion), followed by Emilia-Romagna (€85.1 billion), Veneto (€81.9 billion), Piedmont (€64.9 billion) and Tuscany (€57.6 billion).
Imports in value terms contracted by 10.4%, to €591.5 billion, mainly due to lower energy prices. Imports from the European Union fell only by 0.4% to €337.2 billion, while they fell by 20.9% with non-EU countries, down to €254.5 billion. The main products imported in 2023 were motor vehicles (6.8% of products imported in 2023, up 40.6% from 2022), chemicals (6.2%) and crude oil (6%).
Content source : Istat
Globally Germany remained Italy’s main trading partner in 2023 (11.4% of total trade, -0.12 points compared to 2022), followed by France (7.6% of total trade, -0.13 points), then the United Sates (6.2%, -0.11 points) and China (4.6%, -0.19 points). According to estimates from the Direction of the Treasury based on data from French Customs, France had shown a trade surplus for the 2nd year running of €0.5 billon in 2023, whereas, along with Italy it had shown a trade deficit in 2021. However, when excluding energy, France showed a trade deficit of €9 billon in 2023, close to that of 2022 (-€10 billion), points out a note published in March 2024 by the Direction of the Treasury.
Before the invasion of Ukraine, just over 40% of Italy’s gas imports, or about 30 billion cubic meters, came from Russia. To reduce its dependence on Russia, Italy has made approaches in Africa. Currently, Algeria, which before the war in Ukraine supplied somewhere close to 20% of its gas, has now become the number one gas supplier for the Italian population. The idea of Giorgia Meloni, the head of the Italian government who is following the line adopted by her predecessor Mario Draghi, is to strengthen relations with Libya and Ethiopia in particular with the help of Eni, the national hydrocarbons institute created in 1953.
Weaknesses and opportunities
To fully revive the global Italian economy, the government needs to address a crucial issue: the country’s north-south divide. There is still a gap between the northern regions of the country, which have a network of efficient and structured SMEs, and those in the south, which are affected by unemployment, lack of prospects, the inability to launch structural reforms and to use the funds made available from Brussels on an ad hoc basis. The network of small and medium-sized enterprises is one of Italy’s main particularities. Companies with fewer than 250 employees and an annual turnover of less than €50 million are an important driver of the economy. About 90% of companies have fewer than 20 employees and only 1% have more than 250. The latter generate 38% of Italy’s GDP.
To boost growth, Italy is counting on the funds allocated under the European National Recovery and Resilience Plan (NRRP), which is initially budgeted at €191.5 billion. However, the release of these funds has been linked to the implementation of major reforms, particularly in infrastructure, health, high-speed rail traffic and the ecological transition. Since taking the helm of the Italian government in October 2022, Giorgia Meloni has been working to renegotiate the recovery plan with Brussels, signalling “unrecoverable delays” in the projects that conditioned the granting of funds. After several months of tense negotiations, the European Commission has finally given its approval to the new Italian modified recovery and resilience plan, which includes a REPowerEU chapter. The plan now has a budget of 194.4 billion euros (122.6 billion euros in the form of loans and 71.8 billion euros in the form of grants) and covers 66 reforms, seven more than the initial plan, and 150 investments. “The amended plan has a strong focus on the green transition, allocating 39% of available funds to measures that support climate objectives (which is higher than the 37.5% of the original plan),” the European Commission points out.
According to an overview published by the European Parliament in March 2024, Italy has so far received 52.7% of the resources (€102.5 billion in pre-financing and four payments in both grants and loans), well above the EU average (34.5%). An additional six instalments, each in the form of grants and loans, will depend on further progress in the implementation of the plan. “At the end of 2023 Italy had spent €43 billion or 22 % of the EU resources available for its NRRP, which suggests the importance of the period through to August 2026 for full implementation, not least of its investment measures”, notes the Parliament. As for the OECD it insists that a “sustained fiscal adjustment will be required over a number of years to put the debt ratio on a more prudent path, meet future costs, and comply with proposed EU fiscal rules”. The organisation stresses that this requires “decisive measures to tackle tax evasion, limit the growth of pension spending and engage in ambitious spending reviews. The full implementation of the public investment programmes and structural reforms foreseen in the National Recovery and Resilience Plan could sustainably increase Italy’s GDP, which would have the added benefit of helping to lower the debt-to-GDP ratio.”
So Italy has a very interesting window of opportunity to modernise its economy. All that remains now is to hope that the political quarrels for which it is renowned for will not hinder this opportunity.
Source link : https://market-insights.upply.com/en/italy-one-of-eurozones-essential-economies-but-a-fragile-one
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Publish date : 2024-04-11 07:00:00
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