Italy: Macroeconomic Country Outlook
- According to GlobalData, the country’s economic growth is forecast to expand by 2.7% in 2022 and an annual average growth rate of 1.8% during 2023–24
- Italy was ranked 47th out of 152 nations in the GCRI Q2 2022
- Retail trade grew at an average annual rate of 10.9% during the period January 2022 to May 2022
According to the IMF, the Italian banking sector is exhibiting significant improvement. This is evident by the declining loan to deposit ratio, ample liquidity, and comfortable capital adequacy ratio. Italy banks’ profitability is increasing, and non-performing loans (NPL) are desclining. According to the World Bank, non-performing loans as a percentage of total gross loans declined from 18.1% in 2015, to 4.4% in 2020. According to the IMF, loans issued after the financial crisis have lower NPL ratios and macro-prudential measures have been tightened since January 2015.
Key findings
- Italy’s stance on Russia’s invasion of Ukraine: The Italian government condemned Russia’s invasion of Ukraine. In March 2022, the Italian Council of Ministers declared a state of emergency over Russia-Ukraine conflict until December 31, 2022 and announced to send weapons and aid to Ukraine. The government allocated EUR10 million ($11.8 million) as assistance to Ukraine and created 16,000 reception centers for Ukrainian refugees for assisting Ukrainian population on the national territory. In June 2022, Italy launched a four-point peace plan for Ukraine amid ongoing Russian invasion, which aims for a multilateral peace accord among the nations.
- Recovery and Resilience Facility: In June 2021, the European Commission approved a grant of EUR68.9 billion ($81.5 billion) and a loan of EUR122.6 million ($145 million) under the Recovery and Resilience Facility (RRF). The plan is expected to boost the country’s gross domestic product by 1.5% to 2.5% by 2026. The plan would also introduce up to 240,000 additional jobs in Italy by 2026. The RPF facility allocated EUR15.3 billion ($18.1 billion) to support the green transition with key investments in energy efficiency in residential and public buildings. Moreover, EUR15.3 billion ($billion) has been allocated for sustainable mobility, EUR34 billion ($40.2 billion) for development of renewable energies and EUR11.2 billion ($13.2 billion) for the circular economy and improvement in waste and water management. The regulation will be completed by August 2026.
- Italy is ranked 58th out of 190 countries in World Bank’s doing business ranking in 2020: In terms of ease of doing business, Italy’s score (72.9 out of 100) is lower than Germany (79.7) and the OECD high income regional average (78.4). However, Italy’s score is higher than nations such as Greece (68.4), and Luxembourg (69.6). It takes seven procedures to start a business in Italy as compared to the OECD high income average of 4.9 procedures. The country was ranked 38th in the parameter of getting electricity, 26th in registering property, and first in trading across borders out of 190 nations, according to the World Bank, Doing Business Report (2020).
- Legislation to boost FDI: On March 21, 2022, the Italian government enacted a law to address the economic and humanitarian effects caused by the ongoing Ukraine crisis. The law provides more powers to the country which include (a) power to review acquisitions of controlling stakes by investor in European Economic Area (EEA) making an investment in the energy, transport, communications, financial, health and agri-food sectors (b) power to review minority investments made by non-EEA investors. Moreover, the law extended the government powers to acquisitions by EEA investors outside the defense and national security sector.
- Integration of digital technology: According to the EU, Digital Economy and Society Index (2021), the country allocated for the integration of digital technology, which includes (i) EUR12.8 billion ($15.1 billion) to support digitalization of businesses (ii) EUR5.1 billion ($6 billion) for the development and deployment of advanced technologies (iii) EUR1 billion ($1.2 billion) to boost ICT-related research and development (iv) EUR8.9 billion ($10.5 billion) for technologically advanced machines and (v) EUR1.9 billion ($2.2 billion) to introduce artificial intelligence and machine-learning software, systems, platforms.
- Step toward renewable energy in the country: In June 2022, KGAL, a Germany-based company received approval from Italy to develop three solar PV projects in the country with a combined capacity of 380MW. The company will construct first solar park in Tuscania with a capacity of 150MW and the second solar park in Vitorchiano with a capacity of 90MW. The third approved project is the 140MW Pietra Monreale, which is being built in Sicily. The company is developing solar and wind parks with a total capacity of more than 1.2GW in the Italian market. The project is expected to get operational by Q1 2024. Moreover, the government also encouraged expansion of renewable energy generation in the country. The Italian government envisages increasing the share of green energy within the total energy consumption from 20% in 2020 to 30% in 2030.
Key fundamentals
Sectoral outlook
- Revival for travel and tourism industry: In May 2022, the European Commission approved EUR698 million ($787.3 million) Italian scheme with an aim to support companies that were affected by the outbreak of COVID-19 pandemic. The scheme is included under the National Recovery and Resilience Plan. The aid is expected to take form in direct grants and tax credits for tourism companies and credits for travel agencies and tour operators. Eligible tourism companies will receive aid up to a maximum amount of EUR100,000 ($112,794) per company. The objective is to support companies in addressing liquidity needs and continue their operations post the COVID-19 pandemic. According to the World Economic Forum, Travel and Tourism Development Index (2021), the country ranked 10th out of 117 nations. According to the World Travel and Tourism council, travel and tourism contributed 9.1% to GDP and the sector created 2.6 million jobs, which is equivalent to 11.6% of total jobs in 2021. According to GlobalData, international arrivals to the country is forecast to reach 50.1 million in 2022 and 60.2 million in 2023.
- Robust cybersecurity and policy to boost technology of the country: In May 2022, the country introduced a National Cybersecurity Strategy for the period of 2022–26 in order to address cyber threats and enhance the resilience of the country. The National Cybersecurity Agency approved the strategy, which includes 82 objectives and aims to address the following challenges (i) to ensure a cyber resilient digital transition of the Public Administration (PA) and of the productive system (ii) to predict the evolution of cyber threats to reduce their impact on national infrastructure and organizations (iii) to prevent online disinformation in a broader context of the hybrid threat (iv) management of cyber crisis (v) National and European strategic digital sector autonomy. Moreover, the policy also aims to protect national strategic assets, respond to cyber threats and management of incidents and crises and development of new digital technologies to secure digital assets. Additionally, in 2021, the government announced to provide 1Gbps connectivity in at least 9,000 schools and 12,279 healthcare facilities by 2026. The country allocated EUR6.7 billion ($7.9 billion) to boost network connectivity, including 5G, EUR13.4 billion ($15.9 billion) for digital transition and innovation of the Italian production system and EUR6.1 billion ($7.2 billion) for digitalization of the Italian public administration (PA) by 2026.
- Fund to revive construction sector of Italy: In August 2021, under the Next Generation Italia (which is a part of Recovery and Resilience plan) the country allocated EUR28 billion ($33.1 billion) for high-speed rail and roads, EUR3.7 billion ($4.4 billion) for logistics/intermodal transport. According to 2026 Winter Olympics, the infrastructure investment is estimated at around EUR1 billion ($1.2 billion) and include projects in Lombardy, Veneto and South Tyrol. In June 2022, the European Union (EU) announced to provide EUR57.1 million ($67.5 million) to train operator Trenitalia of the country, which aims to accelerate the deployment of ERTMS Level 2 Baseline 3 on 535 passenger vehicles. EU also anticipated to allocated EUR75 million ($88.7 million) to Italian Rail Network (RFI) for new line construction and tunnelling between Fortezza and Ponte Gardena.
GlobalData Country Risk Index (GCRI) – Q2 2022
Italy was ranked 47th out of 152 nations in the GCRI Q2 2022. The country’s risk score is in the low-risk nations band (30–40). Italy’s risk score across the major PESTLE parameters as well as the overall risk score (36.9), were lower than the world average (44.0), but higher than the West-Europe region’s (26.1). The country secured low risk on macroeconomic (32.7), political environment (35.0), technology and infrastructure (32.5), compared the World. However, the scores are higher than the West-Europe average for the same indicators in Q2 2022.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies on the basis of historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, the UK, Luxembourg, Iceland, and Switzerland.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Italy
Still looking?
Don’t wait - discover a universe of connected data & insights with your next search. Browse over 28M data points across 22 industries.
Explorer
Access more premium companies when you subscribe to Explorer