Economy of Italy

Mother Earth Travel > Country Index > Italy > Map Economy History

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 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 is in the midst of a slow economic recovery and is gradually catching up to its west European neighbors. In the aftermath of September 11 and the global economy's tailspin, Italy--like the rest of the EU--saw its economy stumble. Fourth quarter 2001 results showed zero or negative GDP growth. As a result, Italy's economy decelerated from 2.9% in 2000 to 1.8% in 2001. Average Euro-zone growth in 2001 was 1.4%.

In the post-September 11 period, imports decelerated faster than exports, producing an $8.5 billion surplus in 2001, up from the modest 1.8 billion surplus in 2000. With respect to inflation, Italy is now firmly within norms specified for Economic and Monetary Union (EMU), a major achievement for this historically inflation-prone country. Consumer inflation accelerated from 2.5% in 2000 to 2.8% in 2001. The 1992 agreement on wage adjustments, which has helped keep wage pressures on inflation low, remains in effect. Tight monetary policy by the Bank of Italy also has helped bring inflation expectations down.

Since 1992, economic policy in Italy has focused primarily on reducing government budget deficits and reining in the national debt. Successive Italian governments have adopted annual austerity budgets with cutbacks in spending, as well as new revenue raising measures. Italy has enjoyed a primary budget surplus, net of interest payments, for the last 7 years. The deficit in public administration declined to 1.4% of GDP in 2001, down from 1.7% in 2000. Italy joined the European Monetary Union in May 1998. The national debt, which stood at roughly 124% of GDP in 1995, declined from 110.6% in 2000 to 109.4% in 2001, as it steadily falls toward the EU-imposed debt/GDP ratio of 60% of GDP.

Italy's closest trade ties are with the other countries of the European Union, with whom it conducts about 55% of its total trade (2001 data). Italy's largest EU trade partners, in order of market share, are Germany (16.1%), France (11.7%), and the United Kingdom (5.9%).

Labor
Unemployment is a regional issue in Italy--low in the north, high in the south. The "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 info 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. Among their major agreements are a 4-year wage moderation agreement signed in 1993, a reform of the pension system in 1995, and an employment pact, introducing steps for labor market flexibility in economically depressed areas, in 1996. Most recently, in April 2002, unions held a general strike to protest against labor reforms proposed by Prime Minister Berlusconi.

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.

GDP: purchasing power parity - $1.273 trillion (2000 est.)
GDP - real growth rate: 1.3% (1999 est.), 2.7% (2000 est.)
GDP - per capita: purchasing power parity - $22,100 (2000 est.)
GDP - composition by sector:
agriculture:  2.5%
industry:  30.4%
services:  67.1% (2000 est.)
Household income or consumption by percentage share:
lowest 10%: 3.5%
highest 10%: 21.8% (1995)
Inflation rate (consumer prices): 1.7% (1999 est.), 2.5% (2000)
Labor force: 23.4 million (2000)
Labor force - by occupation: services 61.9%, industry 32.6%, agriculture 5.5% (1999)
Unemployment rate: 11.5% (1999 est.), 10.4% (2000 est.)
Budget:
revenues:  $488 billion
expenditures:  $501 billion (2000 est.)
Industries: tourism, machinery, iron and steel, chemicals, food processing, textiles, motor vehicles, clothing, footwear, ceramics
Industrial production growth rate: 1.9% (1998 est.), 1.9% (2000)
Electricity - production: 247.679 billion kWh (1999)
Electricity - production by source:
fossil fuel:  79.09%
hydro:  18.08%
nuclear:  0%
other:  2.83% (1999)
Electricity - consumption: 272.35 billion kWh (1999)
Electricity - exports: 530 million kWh (1999)
Electricity - imports: 42.539 billion kWh (1999)
Agriculture - products: fruits, vegetables, grapes, potatoes, sugar beets, soybeans, grain, olives; beef, dairy products; fish
Exports: $241.1 billion (f.o.b., 2000)
Exports - commodities: engineering products, textiles and clothing, production machinery, motor vehicles, transport equipment, chemicals; food, beverages and tobacco; minerals and nonferrous metals
Exports - partners: EU 56.8% (Germany 16.4%, France 12.9%, Netherlands 7.1%, Spain 6.3%, Netherlands 2.9%), US 9.5% (1999)
Imports: $231.4 billion (f.o.b., 2000)
Imports - commodities: engineering products, chemicals, transport equipment, energy products, minerals and nonferrous metals, textiles and clothing; food, beverages and tobacco
Imports - partners: EU 61% (Germany 19.3%, France 12.6%, Netherlands 6.3%, Spain 4.4%), US 5.0% (1999)
Economic aid - donor: ODA, $1.3 billion (1997)
Currency: Italian lira (ITL); euro (EUR)
note:  on 1 January 1999, the EU introduced the euro as a common currency that is now being used by financial institutions in Italy at a fixed rate of 1,936.27 Italian lire per euro and will replace the local currency for all transactions in 2002.

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > Italy > Map Economy History