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Economy

North-south divide

Italy’s economic output is similar, both per capita and in total, as that of the UK and France, ranked as the world’s seventh largest economy in 2006 in terms of GDP. The definite division between the north and the south of the country still exists. The north of the country is the most prosperous; it is home to mainly private business and has a developed industrial economy.

Less-developed south.

The south of Italy is less-developed than the north, with a greater dependency on welfare. Its economy is based around agriculture, though tourism is beginning to play more of a role. The south is largely dependent on imports, and the majority of materials used in industry in the region, as well as over 75% of its energy, are imported. The unemployment rate in the south is 20%, against an average rate of unemployment in the country of 7%.

Redressing the balance

Efforts were made during the 1950s to reduce the north-south divide by boosting the economy of the south, but this led to the area becoming reliant on subsidies. Today, the difference in living standards is still apparent, although areas of the south now achieve a good level of economic production. The area is considered to have potential in terms of tourism and its property market, largely a result of being relatively cheap and ‘undiscovered’.

Diversified economy

Italy has a diversified economy, and one of its main industries is tourism. Its GDP real growth rate is recorded at 1.9% (2006 est.), with GDP purchasing power parity of $1.756 trillion (2006 est.). It is estimated that Italy’s underground economy may account for up to a sixth of the country’s official GDP, according to the Ministry of Finance.

Necessary reforms

The government under Prime Minister Prodi acknowledges that Italy has to become more competitive and improve its long-term growth prospects, and so has implemented a series of short-term measures to this effect. Progress in bringing in structural reforms has been slow up to this point, and this is partly attributable to the economic limitations within which the government operates, struggling to bring its budget deficit below the 3% EU limit.

Economic Growth

However, in May 2007 the European Commission increased its forecast for Italy’s economic growth during 2007 to 1.9%, and announced that it predicted the budget deficit for the year would be just 2.1% of GDP, comfortably under the EU limit. The level of foreign direct investment into Italy from overseas was recorded at $16.5 billion in 2006 (Organisation for Economic Co-operation and Development estimate), slightly lower than the high point of $19.9 billion in 2005.

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