ECONOMY
The Italian economy has changed
dramatically since the end of World War II. From an agriculturally
based economy, it has developed into an industrial state ranked
as the world's fifth-largest industrial economy. Italy belongs
to the Group of Eight (G-8) industrialized nations; it is a member
of the European Union and the Organization for Economic Cooperation
and Development (OECD).
Italy has few natural resources.
With much of the land unsuited for farming, it is a net food importer.
There are no substantial deposits of iron, coal, or oil. Proven
natural gas reserves, mainly in the Po Valley and offshore Adriatic,
have grown in recent years and constitute the country's most important
mineral resource. Most raw materials needed for manufacturing
and more than 80% of the country's energy sources are imported.
Italy's economic strength is in the processing and the manufacturing
of goods, primarily in small and medium-sized family-owned firms.
Its major industries are precision machinery, motor vehicles,
chemicals, pharmaceuticals, electric goods, and fashion and clothing.
Italy continues to grapple with budget deficits and high public debt--2.6% and 105.9% of GDP for 2008, respectively. Italy joined the European Monetary Union in 1998 by signing the Stability and Growth Pact, and as a condition of this Euro zone membership, Italy must keep its budget deficit beneath a 3% ceiling. The Italian Government has found it difficult to bring the budget deficit down to a level that would allow a rapid decrease of that debt. The worsening of the economic situation is expected to jeopardize this effort. The deficit is expected to grow well above the 3% ceiling in 2009 and 2010.
Italy's economic growth averaged only 0.8% in the period 2001-2008; 2008 GDP
decreased 1.0%, largely due to the global economic crisis and its impact on
exports and domestic demand. GDP is expected to contract further, with a huge
decrease in 2009 (ranging from 2% to 3%) as the Euro zone and world economies
slow.
Italy's closest trade ties are with the other countries of the European Union, with whom it conducts about 60.1% of its total trade (2007 data). Italy's largest EU trade partners, in order of market share, are Germany (12.9%), France (11.4%), and the United Kingdom (5.8%). Italy continues to grapple with the effects of globalization, where certain countries (notably China) have eroded the Italian lower-end industrial product sector.
The Italian economy is also affected by a large underground economy--worth some 27% of Italy’s GDP. This production is not subject, of course, to taxation and thus remains a source of lost revenue to the local and central government.
U.S.-Italy
Economic Relations
The United States and Italy cooperate closely on major economic issues, including within the G-8. With a large population and a high per capita income, Italy was the United States' twelfth-largest trading partner in 2008, with total bilateral trade of $51.6 billion comprised of exports to Italy totaling $15.5 billion and imports from Italy worth $36.1 billion. The U.S.'s $20.7 billion deficit with Italy in 2008 was slightly below the $20.9 billion deficit registered in 2007. Machinery and aircraft are becoming important U.S. exports to Italy. U.S. foreign direct investment in Italy at the end of 2007 exceeded $28.4 billion.
Labor
Unemployment is a regional issue in Italy--low in the north, high in the south. The overall national rate is at its lowest level since 1992. Chronic problems of inadequate infrastructure, corruption, and organized crime act as disincentives to investment and job creation in the south. A significant underground economy absorbs substantial numbers of people, but they work for low wages and without standard social benefits and protections. Women and youth have significantly higher rates of unemployment than do men.
Unions claim to represent 40% of the work force. Most Italian unions are grouped in four major confederations: the General Italian Confederation of Labor (CGIL), the Italian Confederation of Workers' Unions (CISL), the Italian Union of Labor (UIL), and the General Union of Labor (UGL), which together claim 35% of the work force. These confederations formerly were associated with important political parties or currents, but they have evolved into fully autonomous, professional bodies. The CGIL, CISL, and UIL are affiliated with the International Confederation of Free Trade Unions (ICFTU) and customarily coordinate their positions before confronting management or lobbying the government. The confederations have had an important consultative role on national social and economic issues.
Agriculture
Italy's agriculture is typical of the division between the agricultures of the northern and southern countries of the European Union. The northern part of Italy produces primarily grains, sugarbeets, soybeans, meat, and dairy products, while the south specializes in producing fruits, vegetables, olive oil, wine, and durum wheat. Even though much of its mountainous terrain is unsuitable for farming, Italy has a large work force (1.4 million) employed in farming. Most farms are small, with the average farm only seven hectares.
For further economic and commercial information, please refer to the Country Commercial Guide for Italy.
GDP (purchasing power parity, 2007 est.): $1.8 trillion.
GDP per capita (purchasing power parity, 2007 est.): $31,000.
GDP growth: -1.0% (2008); 1.5% (2007); 1.8% (2006); 0.5% (2005); 1.5% (2004), 0.0% (2003 est.); 0.5% (2002); 1.8% (2001).
Natural resources: Fish and natural gas.
Agriculture: Products--wheat, rice, grapes, olives, citrus fruits, potatoes, sugar beets, soybeans beef, dairy products.
Industry: Types--tourism, machinery, iron and steel, chemicals, food processing, textiles, motor vehicles, clothing, footwear, ceramics.
Trade: Exports (2008 est.)--$534.8 billion f.o.b.: mechanical products, textiles and apparel, transportation equipment, metal products, chemical products, food and agricultural products. Partners (2007)--Germany 12.9%, France 11.4%, Spain 7.4%, U.S. 6.8%, U.K. 5.8%. Imports (2007 est.)--$551.6 billion f.o.b.: machinery and transport equipment, foodstuffs, ferrous and nonferrous metals, wool, cotton, energy products. Partners (2007)--Germany 16.9%, France 9.0%, China 5.9%, Netherlands 5.0%, China 5.2%, Belgium 4.3%, Spain 4.2%.
