'a A RESTRICrTED Report No. EA-81 Public Disclosure Authorized This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized CURRENT ECONOMIC POSITION AND PROSPECTS OF ITALY Public Disclosure Authorized February 18, 1958 Public Disclosure Authorized Department of Operations Europe, Africa and Australasia Conversion Rates of Italian Currency U.S. $1 - Lit. 625 Lit. 1 = U.S. $9.0016 Lit. 1,000,000 U.S. $1,600 TABLE CF CONTENTS CHARTS BASIC DATA SUMMliARY AND CONCLUSIONS I. GENERAL INTRODUCTION . 1 NATIONAL INCOME . 1 CONSUMPTION . .. *. .. ..... .. 1 INVETMFNT . .s . o EMPLOYMNT AND UNEMPLOYMENT. 3 II. SPECIFIC ECONOMIC SECTCRS AGRICULTURE . 4 MINING AND ENERGY . 5 INDUSTRY . .o 7 CONSTRUCTION AND SERVICES . .. .. .. 7 III. MONETARY, FINANCIAL AND FISCAL POSITION PRICES AND WAGES . o .. .o. 0 . .0. 0 . 8 MONEY MARKET AND CAPITAL MARKET . ... .. oo 8 PUBLIC FINANCES. .. 10 IV. EKTERNAL ACCOUNTS FOREIGN TRADE . .. 11 BALANCE OF PAYMENTS . .. 11 OREDTWORTHINESS. 13 STATISTICAL APPENDIX I TALY SUPPLY AND USE OF RESOURCES - 1956 (PERCENT OF GROSS NATIONAL PRODUCT AT MARKET PRICES) SUP Y :.--... .'-..-'"..':.'-..*..................*- . .. ..- . USE. SUPPLY * SE TRANSPORT AND PUBLIC CONSUMPTION OMMUNICATION 7%.o 8% PUBLIC ADMINISTRATION COMMERCE, SERVICES CREDIT, INSURANCE, RENTS PRIVATE AGRICULTURE,> 70% oFORESTS AND TOTAL CONSUMPTIONz FISHERIES - GROSS 22% NATIONAL TOTAL z MINING 1% PRODUCT AVAltL- 100%/ ABILITIES 0:4% L CONSTRUCTIONWATlR 2%- 114%~/ 6% MANUFACTURING 32% z GROSS INVESTMENT 22 1/2% IMPORTS OF -Jmø_ EXPORTS OF GOODS AND SERVICES DAND SERVCES . .%.3% 1 .. ...... ... BRD ES ITALY PRODUCTION INDEXES (1950= 100) 400 400 YEARLY 350- 350 300- 300 250- 250 200 - MINING 200 (irncluding notural gos) MANUFACTURTING I50 - * 150 .50**4 ELECTRIC POWER ....----- ''AGRICULTURAL 100 100 * 50- 50 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD-ES 1323 ITALY PRODUCTION INDEXES (1950=100) 250---, 250 CEMENT 200 200 150 150 100 100 YEARLY 50 --- _50 250 250 METALLURGICAL 200 - 200 150 - 150 oo 100 YEARLY 50 '_50 150 150 TEXTILES 100 __ _100 YEARLY 50 '50 200 200 MECHANICAL 150 150 100 100 e----YEARLY 50 -' 50 250 ---- , L 250 200 -- 200 150 - 150 100 -- 100 *-~ ~~Y EARLY 50 50 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD-ES 1324 ITALY MONEY SUPPLY AND NATIONAL INCOME (INDEX, 1950: 100) 250 250 YEARLY 200 -200 MONEY SUPPLY (Est.) 150- 150 NATIONAL INCOME (At current prices) 10 100- 0 50- 50 0 0 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 WHOLESALE PRICES AND COST OF LIVING (INDEX, 1950 =100) 200---i7 200 YEARLY 150- i 150 COST OF LIVING 100 - 100 WHOLESALE PRICES (All goods) 50 50 1938 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 (Est.) IBRD- ES 1325 ITALY GOVERNMENT APPROPRIATIONS BUDGET (BILLIONS OF LIRE) 0 1000 2000 3000 4000 1952-53 CURRENT EXPENDITURES INVESTMENTS EXPENDITURES REVENUES REVENUES 1953-54ASSESSED EXPENDITURES REVENUES 1954-55 EXPENDITURES REVENUES 1955-56 EXPENDITURES REVENUES 1956-57 (Est.) EXPENDITURES REVENUES 1957-58 (Est.) EXPENDITURES REVENUES 1958-59 EXPENDITURES REVENUES IBRD-ES 1526 ITALY TOTAL EXTERNAL TRADE (BILLIONS OF U.S. DOLLARS) 4 YEARLY TOTALS .300 r,, 3 IMPORTS (c.i.f.) 220 I .100 MONTHLY - Scale is 1/12 of annual scale 0 p . I I ..... I .,pj", ,j 0 VOLUME OF TRADE (FIXED WEIGHTS) (INDEX, 1950= 100) 300 300 YEARLY MONTHLY IMPORTS 100 100 0L EXTERNAL TRADE WITH U. S. (MILLIONS OF U.S.DOLLARS) 800 YE ARLY TOTALS6060 -MONTHLY - Scale is I/12 of '6 600_. annual scale IMPORTS 4 400 1 200 TRADE BALANCES WITH SELECTED AREAS (MILLIONS OF U.S. DOLLARS) +500 Y40 YEARLYSTERN EMISPERE (Excl.D EUROPE (Excl.SterlingVArea) 0( -- 500,0.L..STERLING AREA /4 MONTHLY - Scale is 1/12 of onnual scale -80 _1000 f i l I". ' I I. TERMS OF TRADE (FIXED WEIGHTS) 110(INDEX, 1950=100) . 110 YEARLY QUARTERLY 90 -90 80 - - - ' - ' 1 .. " " 80 '48 '50 '52 '54 '56 M J S D M J S D M J S D M J S D 1954 1955 1956 1957 1BRD-ES 1327 ITALY BALANCE OF PAYMENTS ON CURRENT ACCOUNT (BILLIONS OF U.S. DOLLARS) - .5 1.0 1.5 2.0 2.5 3.0 1952 EXPORTS(f.o.b.) NET INVISIBLES RECEIPTS PAYMENTS U.S. AID, 1953 IMPORTS (f.o.b.) OFFSHORE PROCUREMENT, OTHER MILITARY EXPENDITURES RECEIPTS PAYMENTS 1954 RECEIPTS PAYMENTS 1955 RECEIPTS PAYMENTS 1956 RECEIPTS PAYMENTS 1957 RECEIPTS PAYMENTS OFFICIAL NET HOLDINGS OF GOLD AND FOREIGN EXCHANGE (BILLIONS OF U. S. DOLLARS) 1.5 l .5 END OF YEAR TOTAL 1.0 I O 1.0 NTFOREIGN ExC ANE 5.5 0~ 0 1950 1951 1952 1953 1954 1955 1956 1957 (Aug.) IBRD-ES 1328 ITALY CURRENT BALANCE OF PAYMENTS BY AREA (MILLIONS OF U.S. DOLLARS) t400 1400 1300 +300 U.S. AID, OFFSHORE PROCUREMENT, OTHER MILITARY EXPENDITURES -200 * 200 +100 +100 DOLLAR AREA 0 10 -100 -100 EPU AREA on -200 -200 ALL OTHER O -300 -- 300 -400 -400 1954 1955 1956 IBRO-ES 1329 ITALY TOTAL EXTERNAL PUBLIC DEBT OUTSTANDING (MILLIONS OF U.S. DOLLARS) 1000 ,1000 AS OF JUNE 30,1957 750 750 500 .500 250 .. *..:...250 cD U. S.DOLLARS0 0 0 '48 '50 '52 '54 '56 '58 60 '62 '64 '66 '68 '70 INTEREST AND AMORTIZATION PAYMENTS (MILLIONS OF U.S. DOLLARS) 100 100 ... .TOTAL INTEREST.. 75. 75 50 50 2525 2 . .. AMORTIZATION5 0 0 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 '70 TOTAL SERVICE AS PERCENT OF TOTAL CURRENT FOREIGN EXCHANGE EARNINGS 30%1 30% DOLLAR INTEREST AND AMORTIZATION AS PERCENT OF DOLLAR EARNINGS 20% 20% 10% -/TOTAL10 INTEREST I0% AMORTIZATION ... TOTAL INTEREST SERVICE 0 I 1 .l l1 1i 1 I . I 1 0 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 '70 IBRD-ES 1330 Italy Basic Data Population (1957): 48.4 million Area: 120,000 square miles Gross National Product (1957 estimate): 14,700 billion Lit. ($23.5 billion equivalent) Per CaDita Gross National Product (1957 estimate): 304,000 Lit. ($486 equivalent) Gross Investment (1957 estimate): % of Gross National Product (1957) Financed by: Domestic Savings 21 L External Resources 1 23 Balance of Payments on Goods and Services: 1256 1957 Deficit (in million $ equivalent) 290 245 204 88 (est) Foreigh Trade (in million $ eguivalent): 1954 155 1956 1957 Exports (f.o.b.) 1,648 1,856 2,157 2,518 Imports (cif) 2J4_4 2.712 3,170 2555 Trade Balance - 758 - 856 -1,013 -1,037 Gold and Foreign Exchanae Assets (in million $ equivalent): End of December End of August 1956 195 Gold 338 422 Net Foreign exchange 768 835 Total 1,106 1,257 Public External Debt: Million $ equivalent December 31 195 June 30, 1957 Dollars 569 537 Swiss francs 95 105 Other 217 246 Total 881 888 Vholesale Prices: 1955 1956 1957 June December June December June December (1948=100) 98 98 99 99 96 97 (est.) Cost of Living: 1955 1956 1957 June December June December June December (1948=100) 123 124. 130 130 130 133 (est.) - 1 - Summary and Conclusions 1. The real national income of Italy has continued to increase by an average of approximately 5% per annum during 1956 and 1957. 2. This growth in real income has made possible a continued improvement in consumption, an increase in domestic savings and investment which compares favorably with most other OEEC countries. 3. Although overpopulation and unemployment continue to be serious problems, the recent high levels of investment and economic activity are beginning to reduce chronic unemployment and give promise of eliminating it over the next decade. 4. Agricultural production suffered in 1956 and 1957 from bad weather but development activities have continued and Italy should be able to achieve an over-all balance on food account in her foreign trade during the Ten-Year Vanoni Plan period, ending 1964. 5. The rapid development of natural gas, the further exploitation of hydroelectric power resources, the production of oil in Sicily, the develop- ment of natural steam and the possibility of utilizing nuclear fuels may reduce dependence on imported sources of energy. If a petroleum law satis- factory to international oil companies is enacted, additional petroleum production in Italy may be reasonably expected. 6. Manufacturing industries, especially capital goods and durable con- sumers' goods industries, have greatly increased their output under the impetus of rising domestic investment and export demand. These factors have helped reduce unit costs and render Italy's manufacturing industries more competitive in domestic and foreign markets. 7. Construction and service industries have also been prosperous. Italy is experiencing a residential construction boom of unprecedented proportions. The tourist industry and particularly hotels and restaurants have been operating at capacity. The shipyards are booked for several years ahead and the merchant marine continues to grow. 8. Because of continued sound monetary policy and rising domestic sav- ings, all this expansion has proceeded with relative price stability. 9. The continuing increase in domestic savings has acted aa a stimulant to the capital market and has allowed a substantial increase in long-term financing both for private industry and for public works. 10. Public finances have shown further improvement and revenues continue to exceed current expenditures. Financing of public investment has been carried out by largely non-inflationary means. 11. Exports have on the whole been developing favorably and earnings from invisibles have increased substantially. But because of heavy invest- ment, imports have risen considerably more than exports. - ii - 12. With investment in excess of domestic savings, the balance of pay- ments continues to show a deficit on current account.