Economic Developments in Italian Regions in 2007
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Regional economies Economic developments in the Italian regions in 2007 2 0 0 2008 Rome 8 1 Regional economies BANCA D’ITALIA - Rome - 2008 The new series Regional economies aims at documenting the developments and fostering the economic analysis of the Italian economy at the regional breakdown. The series will gather the annual reports on the economic developments in each region, the update of the main indicators analysed in such reports, and the annual overview report on the economic developments in the Italian regions. ECONOMIC DEVELOPMENTS IN THE ITALIAN REGIONS IN 2007 CONTENTS SUMMARY..................................................................................................................................................5 ECONOMIC DEVELOPMENTS IN THE ITALIAN REGIONS .......................................10 1. Growth and economic activities...............................................................................................10 2. The labour market and the economic conditions of households ........................................21 3. Financial intermediaries..............................................................................................................28 4. The decentralized public finances ............................................................................................41 5. Policies for lagging areas and the new planning cycle ..........................................................47 SPECIAL TOPICS ..................................................................................................................................53 Growth and economic activities 6. Innovation and technology transfer: cooperation between business and universities......53 7. The wholesale market for fresh produce and its impact on prices......................................56 8. The competitiveness of the national seaport system.............................................................61 The labour market and the economic conditions of households 9. Internal migration and immigration from abroad..................................................................66 10. Early school leavers and pupils’ skills ......................................................................................73 Financial intermediaries 11. Household debt and the supply of mortgages with innovative characteristics..................78 12. The organization of lending to small firms and the use of credit scoring .........................83 The decentralized public finances 13. Public spending on infrastructure in the Italian regions .......................................................87 14. Regulation and efficiency in water and urban waste services ...............................................91 15. Public pharmaceutical expenditure an analysis by macro-area.............................................96 STATISTICAL APPENDIX ............................................................................................................. 101 METHODOLOGICAL NOTES..................................................................................................... 125 INDEX OF BOXES Socio-economic disparities in the italian macro-regions 11 Exports from the macro-areas and industrial centres 19 The cost of labour and the cost of living: the North-South gaps 24 Private equity investment 34 SYMBOLS AND CONVENTIONS In the following tables: – the phenomenon in question does not occur .... the phenomenon occurs but the value is not known .. the value is known but is nil or less than half the final digit shown The report was drafted by a working group coordinated by Luigi Cannari, Piero Casadio and (for public finance questions) Giovanna Messina and comprising Antonio Accetturo, Demetrio Alampi, Raffaello Bronzini, Diego Caprara, Amanda Carmignani, Guido de Blasio, Alessio D’Ignazio, Andrea Lamorgese, Luigi Leva, Sauro Mocetti, Roberto Rassu, Carlotta Rossi. Thanks also to Luciana Aimone Gigio, Michele Benvenuti, Enrico Beretta, Paolo Chiades, Alessandra Dalle Vacche, Elena Gennari, Andrea Migliardi, Alessandra Mori, Pasqualino Montanaro, Marcello Pagnini, Carmine Porello, Fabio Quintiliani, Paola Rossi and Alessandro Schiavone, who helped in the preparation of boxes and studies on special topics. The report was edited by Raffaela Bisceglia, Maria Letizia Cingoli and Stefano Vicarelli. Any opinions expressed are those of the authors alone and do not necessarily reflect the views of the Bank of Italy. SUMMARY The report on economic developments in Italian regions in 2007 comprises two sections: the first, focuses on the analysis of economic developments by geographical area, is supplemented by boxes on specific topics of interest; the second brings together studies involving, in particular, the Bank of Italy’s branch network. In 2007 the Italian economy was affected by the global downturn and the Economic acceleration in the prices of raw materials; output growth slowed from 1.8 to 1.5 per developments by cent. As in the previous year, the pace of growth in southern Italy (the regions of the geographical area South and Islands) was slower (0.9 per cent) than in the North-East (1.8 per cent), in 2007 Centre (1.7 per cent) and North-West (1.5 per cent). Industry and services expanded more rapidly in the North-East and Centre than in the rest of the country. In the North-West industry performed more poorly and services barely better than the national average. In the South and Islands, industrial growth was similar to the national average, but expansion in services was more contained, equal to about half that in the Centre and North. After the stagnation of recent years, only the regions of the Centre and North reported a pick- up in investment by industrial firms, compared with a decline in the South and Islands. Nominal exports of goods recorded sustained growth throughout the country, in southern Italy especially. Employment levels continued to rise in the North and particularly in the Centre, confirming a trend under way for over ten years; in the South and Islands employment figures remain close to the levels reported in 2002. Recourse to various forms of temporary employment and consultancy contracts—which have become the most common point of entry into the labour market, including for young highly- educated people—has grown even further, most markedly in northern Italy. Banks’ actions have been influenced by the rise in official interest rates and the Banking and turbulence triggered by the US subprime mortgage crisis. In the second half of the finance in 2007 year lending conditions for firms were tightened slightly, especially for those with the highest risks. The volume of lending to firms continued to grow at a sustained pace throughout Italy, however. In contrast to the previous three years, loan growth in the South and Islands was lower than in the Centre and North. The quality of credit to Italian firms registered a slight improvement in the South and Islands, while remaining in line with the previous year’s national average. The gap between short- term interest rates applied to firms in southern Italy and to those in the Centre and North, which has been narrowing since 2005, declined to 1.2 percentage points. In 2007 the growth rate of loans to households slowed. This trend was more pronounced in the Centre and in southern Italy, in part due to the slump in the property market. No area reported any deterioration in the quality of credit supply to 5 households. In the early months of 2008, banks applied slightly more restrictive conditions to the granting of mortgages to households. Banks’ fund-raising slowed slightly, but only in the North-West and Centre, above all due to the lower growth in deposits. The composition of household portfolios continued to vary widely from area to area. The share of low-risk financial instruments in the South and Islands was higher than in the Centre and North; this reflected not only the lower level of per capita wealth in southern Italy, but also its weaker economy and lower degree of financial literacy, elements that make it even more important for banks to assist customers, and ensure transparency and fairness in their dealings. Public finance In 2007 the public finances fared better than expected. According to the and general national accounts, last year net borrowing declined to 1.9 per cent of GDP (from 3.4 government per cent in 2006), returning after four years to below the 3 per cent upper threshold capital account expenditure fixed under European rules. Public debt resumed its downward trend, reaching 104.0 per cent of GDP compared with 106.5 per cent in 2006. Local authorities helped narrow the gap; spending by communes, provinces and regions fell by 0.5 percentage points of GDP, primarily reflecting the decline in current expenditure. Revenues rose by 0.6 percentage points. Debt remained substantially unchanged at 7.1 per cent of GDP, halting the upward trend of recent years. According to preliminary estimates of the Regional public accounts, in 2007 general government capital account expenditure (investment expenditure and capital transfers) totalled €56.2 billion, of which €19.8 (35.3 per cent) was in the South and Islands. Public investment accounted for 56.2 per cent of spending in the South and Islands, compared with 64.8 per cent in the Centre and North. The studies and boxes relating to productive activities focus on the modest growth of Italy’s regions compared to European ones, the emergence of gaps between the country’s main areas and the current restructuring