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Italy - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Rome
Area:: 301 km2
Total Population:: 59.540
Annual growth rate:: -2.00%
Density:: 202.00/km2
Urban population:: 69%
Population of Milan (4.051), Rome (3.555), Naples (3.000), Turin (1.617), Palermo (947), Catania (831), Florence (825)
Official language: Italian is the official language. There are some regions with linguistic minority groups: Alto Adige (German) and Aoste (French)
Other languages spoken: You should note that the use of dialects persists in this country. Albanian is spoken by approximately 80,000 people in the South and 50,000 people in the rest of the country. 20,000 residents in the North East of Sardinia speak Gallurese. In addition, the Sardinian language is also spoken in Sardinia by approximately 1.2 million people.
Business language: More and more people have some knowledge of English. For initial contact, it is advisable to correspond in Italian. This could speed up communication and avoid misunderstandings. In any case, most firms are able to communicate in English.
Ethnic Origins:: A majority of Italians, with German, French, Catalan Albanian and Croatian minorities
Beliefs: Catholics 83.4%, No religion 16.1%, Others 0.5%.
Telephone codes:
To make a call from: 0
To make a call to: +39
Internet suffix:: .it
Type of State::
Republic based on a parliamentary democracy.
Type of economy::
High-income economy, OECD member, G8 member
The economy relies on imports of raw materials and energy; large public debt (over 100% of GDP)

Economic overview

The recession which the Italian economy entered in late 2010  continued in 2013 (-1.8%), compounded by the political crisis in the country. The context of uncertainty, financial restrictions and fiscal consolidation had a negative impact on consumption and investment. Growth is expected to return to positive numbers in 2014 ( 0.7%), conditioned by constitutional reforms to avoid future political obstacles.


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.

Main industries

The agricultural sector contributes to approximately 2% of the Italian GDP. Italy is the biggest European producer of rice, fruits, and vegetables, as well as the world’s biggest wine producer and exporter. The country is one of the major agricultural players in the European Union. Yet, Italy has limited natural resources. The country must import most of the raw materials required for production and more than 80% its energy.

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

Italy is one of the top 10 trade nations in the world, with trade making up more than 58% of its GDP (WTO 2010-2012 average). Manufactured goods represent more than 90% of the country’s exports.

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

Compared to its European neighbors, Italy attracts little foreign direct investment (FDI) but nevertheless ranks 14th among global investors (UNCTAD, World Investment Report 2013).

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.

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