February 12: Italy’s weak recovery
© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Italian general elections on February 24 and 25 will determine the members of the Chamber of Deputies and of the Senate, the two houses of its parliament. This new parliament will face various structural factors behind the country’s weak performance.
Here is the first instalment of the country’s top challenges in 10 charts – another five are set to follow later in the week, so stay tuned.
1) Stagnant economy in the past decade
The Italian gross domestic product is lower than at the beginning of 2001 and the decline does not show signs of reversing. Even Spain and Greece with their deep economic contraction during the crisis are better off than at their levels at the start of the last decade thanks to their strong growth performance before 2008. Italy had sluggish growth even in the first half of the past decade and the additional output that has been created was totally wiped out with the crisis.
Berlusconi, the billionaire former Italian prime minister pledged to reimburse Italians €4bn for an unpopular property tax. This is probably the first time he has promised to give money back, but it is definitely not the first time he has pledged to cut taxes.
Berlusconi lavished promises of tax cuts periodically throughout the past decade, but he failed to translate them into reality, even when he was in power from 2001 to 2006 and again from 2008 to the end of 2011.
In fact, according to the OECD the average income tax rate increased in Italy across all types of households, whereas it was reduced in most other OECD countries. Read more
Italian exports to non-EU countries reached over €17bn in August, almost 10 per cent more than the same month last year. The data released today by the Italian national office of statistics reveal a growth trend largely driven by the Asian markets, the US and Japan.
Export growth to non-European markets contrasts with a stagnating or contracting trend of Italian exports to Europe since the start of this year and an underperforming trend over the last decade.
But not all regions contributed in the same way to the export rise. In the first quarter of this year Tuscany, Sicily and Emilia Romagna were among the largest contributors. In Tuscany, the export growth to non-European markets grew at an annual rate of nearly 20 per cent, while the exports of the islands to the same markets were around 50 per cent bigger than the same period the previous year.
But as the chart below shows, this is not a new trend.
With the focus on today’s UK GDP numbers showing the UK is technically back in recession after the economy shrunk 0.2 percent in the first quarter, it is worth remembering another important aspect of GDP – levels.
The most recent IMF World Economic Outlook shows clearly that three of the G7 economies Japan, the UK and – more drastically – Italy have never managed to go back to pre-crisis levels of GDP.
GDP growth rebased
Why does this matter? Well it isn’t until pre-crisis levels of GDP are reached it can be meaningfully said economies have returned to some sort of normality (my colleague Keith Fray has written more about this) Read more
|About this blog||Feedback||Commenting|