Italy finally back to its 2007 level !

17. June 2024
-IAM, News

Hugues Chevalier, Economist

While the Italian authorities have congratulated themselves on the pace of growth seen in the Peninsula since the start of the year and on the upturn in industrial activity, these same authorities have failed to mention that in the 1st quarter of this year, GDP finally returned to its level of … 2007. The economic and financial crisis of 2008 and, later, the euro crisis have had devastating effects on the Italian economy, which is recovering only very slowly. A number of figures are instructive in this respect. According to ISTAT, over the last 15 years, the growth gap with Spain has been more than 10 GDP points, 14 with France and 17 with Germany. Compared with 2000 (i.e. almost 25 years ago), the gap is now around 20 points with Germany and France, and over 30 points with Spain. Furthermore, over the last 25 years, industrial production has collapsed by 20% and hourly productivity has risen by just 1.3%. Over the same period, however, hourly productivity rose by 20% in Germany and Spain, and by 15% in France. In the two years preceding the Covid crisis (2018-2019), industrial production collapsed, particularly in the automotive sector (-23%). These figures underline the structural difficulties facing the Peninsula. On top of this, public finances are in a tailspin, with the deficit set to reach 7.4% of GDP this year, the highest in the eurozone. What’s more, public debt is set to reach a new record of 140% of GDP, just behind Greece. The rise in economic forecasts for this year and 2025 is due to a catch-up effect, and Italy, which is now in the relegation group, could be overtaken by Spain over the next few years if the government does not finally tackle the structural problems. The Meloni government therefore has no reason to be complacent.