Monitoring the Italian economy - positive signs or more bad news?

One of the missions of this office is to monitor the local economy and provide indications to the Israeli exporters on this issue so that they can better conduct their business here.

Data just out (13 Aug.) from Eurostat indicates that the GDP in Italy dropped 0.5% in the second quarter of 2009. This is good news if compared with the previous quarter in which the GDP dropped 2.7% but it is less positive if compared with the average for the EU (-0.3%) and with the rise in GDP recorded in France, Germany, Greece and Portugal (+0.3%) in the 2nd quarter of 2009.

Estimates put out by various economic entities here in Italy such as ISTAT and ISAE and others outside of Italy indicate that the GDP for the entire year (2009) is expected to drop by approximately 5% and go back to being positive in 2010 - estimates range from 0.2% to 0.5% growth in GDP.

Italy is experiencing a decline in the demand for its goods abroad - a drop of 20% in its exports; a rise in the unemployment rates to a three year high of 7.9%; And, it has to deal with a staggering public debt (the third largest in the world after the US and Japan) expected to reach 115% of the GDP in 2009 and 120% of the GDP in 2010 (according to the IMF). The large public debt is making it difficult for the Italian government to offer substantial fiscal and other incentives to help drag the economy out of the recession. Italy is also having a harder time with its exports compared with Germany, for example, since a substantial part of it competes with cheaper products produced in developing countries.

Positive signs? As stated above the negative trends in various indicators seem to be slowing down. There is also a rise in consumer and manufacturing confidence. However, it looks like Italy's economy is still not out of the woods and will have to deal with many hurdles on the way to renewed economic growth.

For reviews in Hebrew on this issue see this link.