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Economy of Italy PDF Print E-mail
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Sunday, 12 June 2011 09:13

economy of ItalyItaly has a capitalist economy with high gross domestic product (GDP) per capita and developed infrastructure. According to the International Monetary Fund, in 2008 Italy was the seventh-largest economy in the world and the fourth-largest in Europe. Italy is member of the Group of Eight (G8) industrialized nations, the European Union and the OECD.


In the post-war period, Italy was transformed from a weak, agricultural based economy which had been severely affected by the consequences of World War II, into one of the world's most industrialized nations, and a leading country in world trade and exports. According to the World Bank, Italy has high levels of freedom for investments, business and trade. Italy is a developed country, and, according to The Economist, has the world's 8th highest quality of life. The country enjoys a very high standard of living. According to the last Eurostat data, Italian per capita GDP at purchasing power parity remains approximately equal to the EU average, while the unemployment rate (8.5%) stands as one of the EU's lowest. Italy owns the world's 4th largest gold reserve. The country is also well-known for its influential and innovative business economic sector, an industrious and competitive agricultural sector (Italy is the world's largest wine producer), and for its creative and high-quality automobile, industrial, appliance and fashion design.

Despite these important achievements, the country's economy today suffers from many and relevant problems. After a strong GDP growth of 5–6% per year from the 1950s to the early 1970s, and a progressive slowdown in the 1980s and 1990s, the last decade's average annual growth rates poorly performed at 1.23% in comparison to an average EU annual growth rate of 2.28%. The stagnation in economic growth, and the political efforts to revive it with massive government spending from the 1980s onwards, eventually produced a severe rise in public debt. In 2010, the EU's statistics body Eurostat published that Italian public debt standed at 116% of GDP, ranking as the second biggest debt ratio after Greece (with 126.8%). However, the biggest chunk of Italian public debt is owned by national subjects, that is a major difference between Italy and Greece. In addition, Italian living standards have a considerable north-south divide. The average GDP per capita in Northern Italy exceeds by far the EU average, whilst some regions and provinces in Southern Italy are dramatically below. Italy has often been referred the sick man of Europe, characterised by economic stagnation, political instability and problems in pursuing reform programs.

More specifically, Italy suffers from structural weaknesses due to its geographical conformation and the lack of raw materials and energy resources: in 2006 the country imported more than 86% of its total energy consumption (99.7% of the solid fuels, 92.5% of oil, 91.2% of natural gas and 15% of electricity). The Italian economy is weakened by the lack of infrastructure development, market reforms and research investment, and also high public deficit. In the Index of Economic Freedom 2008, the country ranked 64th in the world and 29th in Europe, the lowest rating in the Eurozone. Italy still receives development assistance from the European Union every year. Between 2000 and 2006, Italy received €27.4 billion from the EU. The country has an inefficient state bureaucracy, low property rights protection and high levels of corruption, heavy taxation and public spending that accounts for about half of the national GDP. In addition, the most recent data show that Italy's spending in R&D in 2006 was equal to 1.14% of GDP, below the EU average of 1.84% and the Lisbon Strategy target of devoting 3% of GDP to research and development activities. Finally, organized crime is also a strong contributing factor in Italy's economic weakness.

 

Last Updated on Sunday, 12 June 2011 10:53