Italy - Market OverviewItaly - Market Overview
- Italy is the world’s 8th largest economy with a GDP of $1.8 trillion in 2016. Although Italy emerged from recession in the first quarter of 2015, Italian GDP remains well below its pre-crisis peak. Italy’s GDP grew by 0.9% in 2016. Analysts predict that the Italian economy will see modest growth in 2017.
- Italy’s current government formed in December 2016 when then Foreign Minister Paolo Gentiloni replaced Matteo Renzi as Prime Minister, following Renzi’s resignation over a constitutional reform referendum defeat. Renzi remains the head of the center-left Democratic Party (PD), which continues to lead the governing coalition, including the New Center Right party led by Foreign Minister Angelino Alfano and other smaller centrist parties. The current government is expected to last through the end of current legislature, after which national elections will be held in either the fall of 2017 or early 2018.
- The Gentiloni government has sought to continue the Renzi reform agenda, focused on increasing Italy’s growth potential through the implementation of labor market, public administration, civil justice, and education reform, with a particular focus on closing the employment gap in the South.
- Renzi’s efforts to streamline Italy’s political institutions failed however, so political instability will likely continue to constrain Italy’s capacity to undertake structural reform. Nonetheless, as previously-approved reforms are implemented, opportunities for U.S. companies will continue to grow in many sectors.
- In 2016 Italy was the 20th largest market for U.S. exports, which totaled approximately $16.8 billion, and the 6th largest export market in the EU, following Germany, the UK, Netherlands, Belgium and France. However, export values to the Netherlands (Rotterdam) and Belgium (Antwerp) are skewed by the ‘Rotterdam Effect’ where goods are valued at the port of entry, but then distributed throughout the EU.
- U.S. exports to Italy are concentrated in high-value sectors such as pharmaceutical products (22%), nuclear reactors and machinery (11%), aircraft (6%) and medical instruments (6%).
- The United States remained Italy’s largest non-EU export market. In 2016, the United States was Italy’s third largest destination for exports, with U.S. imports from Italy totaling $45.4 billion, following Germany and France. The U.S. had a goods trade deficit with Italy valued at $28.6 billion in 2016.
- In 2015 Italian foreign direct investment in the U.S. totaled $47 billion, supporting 126,500 U.S. jobs. Top industry sectors for Italian FDI include industrial machinery, automotive components, metals, software and IT services, consumer products and alternative energy.
- Italy’s cumulative inward FDI investment equaled 17% of GDP, well below the EU average of 49%, in 2014, due largely to structural problems, which affect domestic as well as foreign investment. U.S. direct investment in Italy totaled $22.5 billion in 2015, ranking Italy 8th in Europe, less than half of U.S. investment in France and one-fourth the size of U.S. FDI in Germany. U.S investment in Italy is concentrated in manufacturing, computer services and software, and energy, with significant industrial relationships in the aerospace and automotive sectors.
- Italy has a population of approximately 61 million. Industrial activity is concentrated in the north from Turin in the west through Milan to Venice in the east. This is one of the most industrialized and prosperous areas in Europe and accounts for more than 50% of Italy’s national income. By contrast, Italy’s southern region, or “Mezzogiorno” is less developed.
- The Italian economy is driven in large part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises, many of them family owned.
- Small and medium-sized firms (SMEs) dominate Italy’s economy, many of which are family-owned, comprising 99% of Italian businesses and producing 68% of Italy’s GDP
- Italy’s SME sector has a higher proportion of firms employing fewer than ten people than the EU average. These companies contribute nearly half of total employment and one-third of value to the economy.
- Italy ranks 50 out of 190 countries in the World Bank Doing Business Report and 60 out of 176 countries in Transparency International’s Corruption Perception Index.
Italy Trade Development and Promotion