New figures show a vibrant Italian economy: are we looking at a comeback of the second industrial power of Europe a few months away from the next G7 summit where Italy will hold the Presidency?
International investors might find it more useful to look at real economic figures than rating agencies reports: an interesting article of Mr Marco Fortis on the Italian liberal newspaper Il Foglio (July 7th 2023) – “l’Italia si avvicina al suo G7 con dati da record. Eccoli” shows indeed stunning figures on the Italian economy that clash with the story telling of the last few decades, describing Italy as a former economic power stagnating in a permanent crisis, overburdened by its unsustainable lifestyle and public debt.
Stronger GDP growth then other big EU economies
Italian GDP will show at the end of 2023 a 5% growth in 2 years (2022-2023). To compare with peers economies, Italy’s GDP shows, in the same time span, a growth of 2,2% on 2019 after the pandemic shock, whereas France’s growth on 2019 will stop at 1,5% and Germany’s economy will reach 2019 level only at the end of this year.
Italian growth is proving to be a structural one and not just a consequence of the exceptional Government spending after the pandemic.
Fiscal reforms on tech investments and exports are the key of Italian success
As Fortis’s article explains, the main reasons for this are 2:
- a boost of industrial investments due to the fiscal reform launched in 2015 (called Industry 4.0) aimed at fostering capital and technology intensive investments;
- a stunning growth of exports partly due to the above mentioned investments growth.
As far as investments growth is concerned, Italy registered a peak of 12,7% in the last two years and has the second highest Industrial investments on GDP ratio among the G7 countries after Japan.
As regards Italian export, its growth is foreseen to reach 12% in 2 years, setting Italy as the second-best trade balance in the G7 after the “world export champion” Germany. This suggests that the much-criticized Italian model of fragmented production, small and flexible SME’s and short supply chains has proved to be the secret of Italian success after the pandemic on the international markets.
On top of this, we may expect positive effects on the real economy in the next years due to the large investments (part of them in infrastructures) financed by the 200 billion Euros Next Generation EU program assigned to Italy after the pandemic crisis.
A sustainable economy
Moreover, Italy shows surprisingly positive data also in the green economy field: even though the country doesn’t have nuclear plants on its territory (like France and the UK) and is basically living on raw materials and semifinished goods transformation, it ranks third in the G7 by CO2 emissions (after France and the UK) and shows the lowest per capita consumption of natural resources.
Virtuous management of Government spending
In the final part, the article of Marco Fortis looks at the financial data. Italy has indeed a very high public debt and it is often described as a reason for concern for the monetary stability of Europe. Nevertheless, data show that the Italian public debt has been growing at a slower pace than that of all the other G7 Partners in the 2014-2023 decade. This is due to overall good management of public finances which allowed Italy to reach a primary surplus in 7 years out of 10 in the above mentioned decade. After all, says Fortis, Italy will join the G7 summit as the only member of the exclusive club showing a primary surplus. Furthermore, the overall debt (Government, companies and families) is the second lowest in the G7 after the German one.
With these figures a better rating for Italy is a must
To conclude, the hard reality of economic data shows a most likely come back of Italy as vibrant industrial economy, definitely deserving a better rating from international rating agencies, which would also affect positively interest rate spending on the Italian public debt and secure financial stability in Europe.
