Presented on 7 November to the Chamber of Deputies, the SVIMEZ 2017 (acronym for Association for the Development of Industry in Southern Italy) report announces positive signs of growth in Southern Italy. The forecasts for 2017 and 2018 presented by Professor Adriano Giannola, President of SVIMEZ and Advisory Committee Member of Tendercapital, confirm that “the South is capable of latching on to the recovery, with growth rates just below those seen in the Centre-North”. However, as noted above, there are still many challenges to be faced to definitively overcome the crisis. Let’s look at a summary of the main points of the analysis.
The South is growing more than the Centre-North for the second year in a row
In 2016 GDP (concatenated prices) rose in the South by 1%, almost analogous to the growth seen in 2015 (1.1%). The increase was 0.2 points higher than in the rest of the country (0.8%), while last year the gap in favour of the South was double that amount (0.4%). This trend benefitted from several factors in terms of supply as well as demand, including the recovery in the manufacturing sector and the consolidation of the construction sector recovery, caused by the closure of 2007-2013 European Structural Fund programming and the decline in net imports at current prices for the South, against growth in exports abroad (-2.5% compared to +1%).
Domestic demand supporting growth
The GDP growth trend in the South has been supported by a rise in consumption as well as investments: in 2016 both items recorded a positive increase, as they did in 2015, after a good seven consecutive years of declines. Domestic final consumption rose in the South by 1% in 2016, up compared to the previous year (0.6%). In particular, household consumption rose by 1.2% in the South in 2016, the same value as in 2015 and slightly higher than the rest of the country (1.4% compared to +1.9% in 2015), although a sense of uncertainty and difficulty with respect to future spending capacity remains in household purchasing behaviours. In 2008-2016 the cumulative decline in household consumption came to -11% in the South, much more considerable than the downturn seen in the rest of the country, which was also significant (-2%). The improvement in the business confidence climate and favourable conditions in the credit market, along with positive expectations with respect to domestic demand, have supported investments in the South as well, which rose by 2.9%, more than confirming the increase of 2015 (2.0%). The increase was similar to that of the Centre-North, where there was less of a drop over time. In 2008-2016, gross fixed investments decreased by -34.9% cumulatively in the South, roughly 12 points more than in the rest of the country (-23.4%).
Different trends in different sectors
The year 2016 was characterised by uneven sector trends, which is typical in a phase of economic recovery. Also taking into consideration the sum of additional sector values, and not GDP, growth has been higher in the South (0.8%) than in the rest of the country (0.6%): this positive difference pervades the trends of every sector, except for agriculture (-4.5% after +7.5% in 2015) and financial services. As concerns industry, in 2016 GDP in the South rose further, with an increase (2.2%) higher than that of the previous year (1.3%, while in the rest of the country the increase reached only +0.8%, marking a slowdown compared to +1.7% in 2015), which followed three consecutive years of downturns. The construction sector also recorded growth, but only in the South. Growth in 2016 also regarded services, although to a generally lesser extent.
Productivity
One of the negative effects of the crisis was the expansion of competitiveness gaps between strong and weak areas of the country, to the disadvantage of the latter. The long negative economic trend, the reduction in resources for public productive infrastructure and the decline in domestic demand are all factors which contributed to weakening the economic apparatus of Southern regions. Proof of this comes from the analysis of productivity gaps, expressed in terms of labour productivity, which may be considered an approximation of the area’s level of competitiveness.
Strong regional unevenness and risk of poverty
After its inevitable expansion during the recession, the development gap between the country’s Northern and Southern regions, measured in terms of GDP per capita, reduced considerably in the last two years, particularly evidently for Abruzzo, Molise, Campania and Basilicata. However, significant levels of inequality remain: in 2016, GDP per resident of Italy’s wealthiest region, Trentino Alto Adige, with its €38,745 per capita, is more than double that of the poorest region, Calabria, which had per capita GDP of just €16,848. Therefore, the figure concerning poverty remains dangerous, “at the highest levels ever, and the level of inequality within the area [which] is holding back the recovery in consumption”. The report points to austerity policies as the reason for the deterioration of the capacity of public welfare to offset the increasing inequality induced by the market, due to the completely insufficient private welfare system in the South. The risk of poverty comes to 34.1% in the South, involving one citizen out of three. In addition, in every southern region, the value is higher than the national figure (19.0%) as well as that of the Centre-North (11.0%). In the most populous regions, Sicily and Campania, the risk of poverty has even reached 40%.
Forecasts for 2017 and 2018
From the estimates provided in the report, updated as of October of this year, it can in fact be seen that in 2017 “Italian GDP rose by 1.5%, +1.6% in the Centre-North and +1.3% in the South”. In 2018 – the Report continues – the national GDP growth rate will come “to 1.4% with growth of 1.4% in the Centre-North and 1.2% in the South”. According to SVIMEZ, domestic demand trends will drive the positive evolution of GDP in 2017 and 2018, “which in the South will reach +1.5% and +1.4%, respectively (in the Centre-North, on the other hand, this year it increased by +1.6% and next year it will rise by 1.3%)”. For 2018, SVIMEZ forecasts significant growth in exports and total investments, “which will increase more in the South than in the Centre-North: exports of +5.4% compared to +4.3%, investments of 3.1% compared to +2.7%”.