Italy - Overview
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Benefiting from lower interest rates, the country has now exited the Excessive deficit procedure (the deficit should remain below 3%), but the economic indicators are still very worrisome. Public debt exceeds 2000 billion euro (136 % of GDP) and household consumption and investments have shrunk .
The cabinet appointed by Letta in April focused on measures to mitigate the effects of the crisis by financing partial unemployment and abolishing the property tax. After Mario Monti's resignation last year , Prime Minister Enrico Letta has also resigned and should be replaced by the new leader of the PD Matteo Renzi. Political instability has had an impact on the country's economic situation. Debt reduction and the protection of the banking system must remain a priority.
The unemployment rate, which has increased since the global financial crisis, is around 12.5%, excluding partial unempoyment. Young people have been the hardest hit, with a rate of unemployment close to 30 %. Regional inequalities betweent he highly industrialized and dynamic North and the poor rural southern Mezzogiorno areas are high and organized crime remains a problem.
The Italian fabric industry is mostly composed of small and medium family businesses. More than 90% of industrial companies have less than 100 employees, thus lowering the country’s competitiveness in the global market. Luxury goods (haute couture, cars, gourmet food items) play an important role in Italian industry. The country is the premier exporter of luxury goods. Precision machinery, motor vehicles, chemical products, pharmaceuticals, electrical items, fashion, and clothing make up its major industries.
The service sector contributes to 70% of the GDP. Tourism plays a major role, making Italy the third biggest tourist attraction in Europe, after France and Spain.
Foreign trade overview
After several years of a trade deficit, since the sovereign debt crisis in 2010, Italy has changed its direction. In 2013, the country registered the second trade surplus in eight years, due to a drop in imports and, more marginally, a slight increase in exports. The trade balance should stabilize in 2014 with the expected imports recovery.
Its main trade partners are European Union nations (Germany, France, Spain, the Netherlands and the United Kingdom), China, the United States, Switzerland, and Russia.
FDI flows are highly volatile and fall and rise in reaction to the opportunities created by the crises of the Italian economy. After recovering in 2011, they have now again fallen sharply. A recovery of the FDIs is expected in 2014 if the country becomes more politically and economically stable.
A privatization program implemented by the government and the energy sector and telecommunication markets liberalization offer interesting opportunities to investors. Italian investment abroad exceeds foreign investment in Italy. In spite of the recent reforms, various interest groups including organized crime are still heavily involved in the country's economic life. The taxation system is also an obstacle to FDI. Nevertheless, Italy is considered a very transparent country with a favorable business climate.