OECD ECONOMIC SURVEY OF ITALY 2019
Reviving growth and broadening its benefits 1 April 2019, Romewww.oecd.org/eco/surveys/italy-economic-snapshot/
@OECDeconomy
@OECD
Key messages
2
• A clear multi-year reform programme to boost employment and productivity, while reducing steadily the public debt ratio
Stronger, more inclusive and sustainable growth
• Strengthen work incentives through tax and social benefit reforms and improving public employment services
Tackling large social and regional divides
• Local administration needs strengthening and rationalising with better support and coordination from the central government
Better public investment and regional development policies
Italy performs well in health, social connections and work-life balance
OECD Better Life IndexRankings from 1 (highest) to 35 (lowest), 2017
3
Source: OECD (2017), OECD Better Life Index.
1417 18
21 22
28 2830 31 31 32
Wor
k-lif
eba
lance
Inco
me &
wea
lth
Socia
lco
nnec
tions
Healt
hst
atus
Civic
enga
gem
ent
Hous
ing
Subj
ectiv
ewe
ll-be
ing
Envir
onm
enta
lqu
ality
Educ
atio
n &
skills
Pers
onal
secu
rity
Jobs
&ea
rnin
gs
Italy20% top performers 60% middle performers 20% bottom performers
More jobs have been created and unemployment has fallen
Employment and unemployment rates
4* Persons aged 15-64Source: OECD Labour Force Statistics database.
55
56
57
58
59
60
4
6
8
10
12
14
2005 2007 2009 2011 2013 2015 2017 2019
%% Unemployment rate Employment rate
Banks are in better health
Banks’ return on assets and bad loan ratio
51. Data for 2018 refer to either Q1 (United Kingdom), Q2 (France and Italy) or Q3 (Ireland, Portugal and Spain), depending on data availability. Source: IMF Financial Soundness Indicators database; and Bank of Italy.
-1.0
-0.6
-0.2
0.2
0.6
1.0
1.4% 2013 2016 2017 2018¹
Return on assets
0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018
%Bad loans to non-financial corporations
as a share of banks' total lending
After a modest recovery, the economy is weakening amid persistent challenges
6
The economy had been slowly recovering but recently it has stalled
Source: OECD Economic Outlook 104 database, including more recent information.
Real GDP growth
7
-1.2-1.0-0.8-0.6-0.4-0.20.00.20.40.60.81.0
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q1
2013
Q3
2014
Q1
2014
Q3
2015
Q1
2015
Q3
2016
Q1
2016
Q3
2017
Q1
2017
Q3
2018
Q1
2018
Q3
%, Q-o-Q
Growth will resume at a modest pace
Annual % change, unless otherwise indicated
8Note: p denotes projections for 2019 and 2020.Source: OECD Economic Outlook 104 database, including more recent information.
2018 2019 (p) 2020 (p)Gross domestic product 0.8 -0.2 0.5Private consumption 0.6 0.5 0.5Gross fixed capital formation 3.2 -0.2 1.1Exports 1.4 2.7 2.3Imports 1.8 2.1 2.7Unemployment rate (%) 10.6 12.0 12.0Fiscal balance (% GDP) -2.1 -2.5 -3.0Public debt (gross, % of GDP) 132 134 135Current account (% of GDP) 2.6 2.7 2.4
Real GDP is still well below its pre-crisis peak
Source: OECD Economic Outlook 104 database, including more recent information.9
90
92
94
96
98
100
90
92
94
96
98
100
2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1
Real GDP, Index 2008Q1 = 100
Italy is the only OECD country whereincomes are no higher than in 2000
10
% difference in real GDP per capita between 2000 and 2018
Source: OECD Economic Outlook 104 database, including more recent information.
-5
0
5
10
15
20
25
30
-5
0
5
10
15
20
25
30
BottomOECD -
ITA
PRT FRA JPN ESP CAN GBR USA DEU OECD TopOECD -
LTU
155
Productivity has stagnated
11
Real GDP per worker, 2007 = 100
Source: OECD Economic Outlook 104 database, including more recent information.
90
95
100
105
110
115
90
95
100
105
110
115
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Italy France Germany Spain Portugal
Poverty rose during the crisis,especially for the young
12
% of age groups living in households in absolute poverty
Source: ISTAT.
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
%% Below 18 18-34 years 35-64 years 65 years and over Total
North Centre South
0
5
10
15
20
25
30
1997 2001 2005 2009 2013 2017
Relative poverty rate, % of persons living in households in relative poverty
Italy’s large regional disparitieshave widened
13
Employment rate and relative poverty rate
Source: ISTAT.
35
40
45
50
55
60
65
70
1977 1985 1993 2001 2009 2017
Employment rate% of population, 15-64 year olds
Rising numbers of the youngare emigrating
14Source: ISTAT; Eurostat; and OECD calculations.
0
10
20
30
40
50
60
70
2002 2005 2008 2011 2014 2017
Italian emigrants by age groupThousand of persons
Until 17 years 18-39 years40-64 years 65 years and over
020406080
100120140160180
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Italian emigrants Thousand of persons
Population ageing will soonshrink the workforce
15
Age groups’ share of population, %
Source: UN World Population Prospects database.
10
20
30
40
50
60
10
20
30
40
50
60
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Below 24 years 25-64 years 65 years and over
90
100
110
120
130
140
90
100
110
120
130
140
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
% %
High public debt poses risks andreduces fiscal options
16
Gross public debt-to-GDP ratio
Source: OECD Economic Outlook 104 database, including more recent information.
Reforms to enhance growth and well-being while reducing the public debt
17
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
2018 policies
2019 policies
Recommended reform package
%%
A broad multi-year reform programmewould boost growth
Note: the recommended reform programme includes actions, among other things, to raise the efficiency of the publicadministration, introduce an in-work benefit scheme, strenghten active labour market programmes and additionalsupport for R&D spending.Source: OECD calculations.
18
Trend annual real GDP growth rate, %
Reforms to boost growth through higher employment, investment and productivity
% difference in level of GDP, relative to 2018 policies
191. Components do not sum to overall effect due to interactions between individual reforms.Source: OECD calculations
2025 2030 2040Activating workers:Raise active labour market spending per unemployed personby 130% by 2025
0.9% 3.7% 6.3%
More effective public administration and justice systems:Reform the public administration and justice system, to close half of the gap in ‘rule of law’ between Italy and the OECD average by 2030
0.2% 1.1% 4.4%
Reducing inequality and the labour income tax wedge:Introduce a moderate guaranteed minimum income scheme, in-work benefits, and reform social security contribution rates and tax credits
0.9% 2.4% 3.8%
Invest in innovation: R&D spending rises from 1.3% of GDP to 2.0% of GDP by 2025, near the G7 average
0.0% 0.1% 0.6%
Support labour force inclusiveness and participation:Raise in-kind family benefits, such as child and elder care, by 40% by 2030, to reach the OECD average
0.0% 0.2% 0.5%
Overall effect1. 2.0% 7.8% 16.2%
80
100
120
140
160
180
200
220
80
100
120
140
160
180
200
220
2000 2005 2010 2015 2020 2025 2030 2035 2040
2019 policies, OECD projections, 2% primary surplus
Recommended reform package + primary surplus at 2% of GDP
Recommended reform package + lower interest rates (spread declines to 100) + higher primary surplus(3.3% of GDP)
A larger primary surplus and the reform package would put debt on a downward path
Public debt, % of GDP
20Source: OECD calculations.
Set out a medium-term fiscal plan within the EU Growth and Stability Pact, aiming to steadily raise the primary surplus.
Reverse the changes in early retirement rules introduced in 2019.
Few payments are done electronically, abetting tax evasion and supporting informality
Non-cash payments, % of GDP, 2017
21Source: ECB.
0
1000
2000
3000
4000
5000
6000
0
1000
2000
3000
4000
5000
6000
ITA PRT ESP FRA DEU GBR Top OECD -CZE
Lower the maximum threshold for cash payments. Continue to improve voluntary tax compliance and avoid repeated tax amnesties.
Continue to improve coordination across tax administration agencies.
Removing obstacles hindering thegrowth of small, productive firms
would boost productivityLabour productivity, 2016 or latest available
22Note: Labour productivity is computed as value added per person employed, thousands of USD, current PPPs.Source: OECD Entrepreneurship at a Glance Highlights 2018.
0
20
40
60
80
100
120
0
20
40
60
80
100
120
BottomOECD - MEX
PRT ESP ITA DEU FRA GBR Top OECD -DNK
1-9 persons 10-19 persons 20-49 persons 50-249 persons 250 persons or more
Continue to pursue reforms to boost productivity including measures to improve the efficiency of the judicial system through improvements in administration processes and greater use of alternative dispute resolution.
Complete the reform of the insolvency regime.
Ensuring all regions have effective waste management can lift well-being
Source: ISPRA.
Waste management by region, % of total waste collection
23
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
Sicil
ia
Molis
e
Calab
ria
Pugl
ia
Basil
icata
Lazio
Ligu
ria
Cam
pani
a
Tosc
ana
Abru
zzo
Piem
onte
Valle
d\'A
osta
Umbr
ia
Marc
he
Sard
egna
Emilia
-Rom
agna
Friu
li-Ve
nezia
Giu
lia
Lom
bard
ia
Tren
tino-
Alto
Adi
ge
Vene
to
Recycling waste collection Non recycled waste collection
North
CentreSouth
Restructure operations relating to waste management of sub-national governments that repeatedly fail to reach targets for waste collection and recycling.
Main recommendationsA multi-year reform programme to enhance growth
and well-being while boosting fiscal credibility
Develop a multi-year programme of institutional, economic and social reforms and do not reverse important measures taken in recent years.
Boost fiscal credibility by setting out a medium-term fiscal plan within the EU Growth and Stability Pact, aiming to steadily raise the primary surplus.
Continue to pursue reforms to boost productivity including measures to improve the efficiency of the judicial system through improvements in administration processes and greater use of alternative dispute resolution.
Reverse the changes in early retirement rules introduced in 2019 and preserve the link between retirement age and life expectancy.
Abolish tax expenditures that are poorly targeted or have outdated objectives.
Restructure operations relating to waste management of sub-national governments that repeatedly fail to reach targets for waste collection and recycling.
More in ‘Key policy insights’
24
Addressing Italy’s socialand regional disparities
25
Social disparities are largeand follow regional lines
Source: ISTAT Regional database.
Value added per employeeEUR, 2016
26
Relative poverty rate% of persons living in households in relative poverty, 2017
Wide regional differences in employment rates drive income disparities
Note: Coefficient of variation in employment rates across regions, 15-64 year olds.Source: OECD Regional Statistics database. Eurostat data for France.
27
Dispersion of employment rates across regions*
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
SmallestOECD -
ISL
JPN DEU GBR CAN PRT ESP USA FRA LargestOECD -
ITA
Males Females
Employer social security contributions are high, stifling employment growth
Source: OECD Taxing Wages database.28
Average, % of labour cost, 2017
0
10
20
30
40
50
60
0
10
20
30
40
50
60
SmallestOECD-MEX
CAN GBR USA JPN OECD ESP PRT FRA ITA DEU LargestOECD -
BEL
Employer SSC Employee SSC Income tax
Reduce the labour income tax wedge on low-income workers and second earners by lowering employer social security contributions and tax and benefit reforms, while maintaining the tax system’s progressivity.
Transfers do not reachthe poorest households
Source: OECD calculations based on the OECD Income Distribution database.29
Transfers to poorest 20% of working age population, 2016
05101520253035404550
05
101520253035404550
LowestOECD -
GRC
ITA PRT ESP JPN FRA USA OECD CAN DEU GBR HighestOECD -
NZL
% of total transfers% of total transfers
The Citizen’s Income provides a large boostto poor households
Note: CI indicates “Citizen’s Income”, while REI indicates “Reddito d’Inclusione”.Source: Calculations based on OECD Tax-benefit model.
30
Net household income for households receiving guaranteed minimum income, % of median disposable income
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
Lowe
st O
ECD
-US
A ITA,
REI
PRT
CAN
ESP
OECD
aver
age
FRA
DEU
ITA,
CI
GBR
JPN
High
est O
ECD
-IR
L
Single Couple, 2 children
relative poverty line
ITA REI ITA CI ITA refom package 10th-90th percentile range of OECD countries
The Citizen’s Income discourages moving into low-wage work, especially in single-earner households
Note: CI indicates “Citizen’s Income”, while REI indicates “Reddito d’Inclusione”.Source: Calculations based on OECD Tax-benefit model.
31
Effective tax rate when moving into work, %
% of average wage % of average wage
-40
-20
0
20
40
60
80
100
120
10%
30%
50%
70%
90%
110%
130%
150%
Couple, 2 earners, 2 children
Strong work incentive
Weak work incentive
-40
-20
0
20
40
60
80
100
120
10%
30%
50%
70%
90%
110%
130%
150%
Single
Strong work incentive
Weak work incentive
The proposed reforms (tapering CI benefits, low-income in-work benefits, and reformed tax credits)
would boost incomes
Source: Calculations based on OECD Tax-benefit model.32
% gain in net income from the reform package relative to 2018 policies
Lower and taper off Citizen’s Income benefits to encourage beneficiaries to seek employment in the formal sector and introduce an in-work benefit for low-income earners.
-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
0 20 40 60 80 100 120 140 160 180 200% of average full-time earnings
Single, 2 children Couple, 2 earners, 2 children
Low access to childcare in many regionsis a barrier to work
Source: ISTAT (2017) and OECD calculations
Childcare places, ages 0-2, per 100 children, 2014
33
Provide more quality infant care places at a low cost relative to average wages, prioritising regions with low female employment.
05101520253035
05
101520253035
Piem
onte
Friu
li-Ve
nezia
Giu
liaVe
neto
Tren
tino-
Alto
Adi
geLo
mba
rdia
Ligu
riaVa
lle d
'Aos
taEm
ilia-R
omag
naMa
rche
Lazio
Tosc
ana
Umbr
iaCa
mpa
nia
Calab
riaSi
cilia
Pugl
iaBa
silica
taAb
ruzz
oMo
lise
Sard
egna
North Centre South
Public structures Private structures
Strengthening public employment services is key to job creation
* Employees aged 25-64 who started a job during the previous 12 months, 2014 data. Source: OECD calculations based on EU-LFS 2014.
% of employees who found a job through public employment services*
34
0
5
10
15
20
25
0
5
10
15
20
25
Bottom OECD -ITA
ESP GBR DEU FRA PRT Top OECD -HUN
Implement a multi-year plan to revamp public employment services based on enforcing essential service standards and higher investments in IT systems, profiling tools and human resources.
Grant to ANPAL the power to restructure public employment services that repeatedly fail to meet commonly agreed performance targets.
Social services are weakwhere they are most needed
Source: ISTAT; Eurostat; OpenCivitas; and OECD calculations.35
Ensure capacity to administer the Citizen’s Income by building on and strengthening, where necessary, municipalities’ social assistance services and establishing strong collaboration with public employment services.
0
5
10
15
20
25
30
0
5
10
15
20
25
30
-60 -40 -20 0 20 40 60 80
North Centre South
Efficiency in social care provision, region average
Severe material deprivation rate, %High material deprivationWeak efficiency
Low material deprivationWeak efficiency
High material deprivationStrong efficiency
Low material deprivationStrong efficiency
Main recommendationsAddressing Italy’s social and regional disparities
Implement a multi-year plan to revamp public employment services based on enforcing essential service standards and higher investments in IT systems, profiling tools and human resources.
Grant to ANPAL the power to restructure public employment services that repeatedly fail to meet commonly agreed performance targets.
Ensure capacity to administer the Citizen’s Income by building on and strengthening, where necessary, municipalities’ social assistance services and establishing strong collaboration with public employment services.
Provide more quality infant care places at a low cost relative to average wages, prioritising regions with low female employment.
Reduce the labour income tax wedge on low-income workers and second earners through lowering employer social security contributions and tax and benefit reforms, while maintaining the tax system’s progressivity.
Taper Citizen’s Income benefits to encourage beneficiaries to seek employment in the formal sector and introduce an in-work benefit for low-income earners.
More in Chapter 1: Tackling Italy’s social and regional divide 36
Improving public investment and regional development policies
37
Public investment has slumped
Source: OECD Economic Outlook 104 database, including more recent information; and OECD National Accounts database.38
Simplify the most complex aspects of the public procurement code, but protect the powers of the anticorruption authority.
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Italy France Germany United States
Government investment, % GDP
Perceived infrastructure quality is lagging
Source: World Economic Forum (2018).39
Develop a comprehensive public investment and spatial plan linking infrastructure developments with land use management.
Global Competitiveness Index, scale from 1 to 7 (best)
02468
Botto
m ITA
OECD GB
R
CAN
DEU
ESP
USA
FRA
JPN
PRT
Top
Roads
02468
Botto
m ITA
OECD PR
TFR
ACA
NES
PDE
UGB
RJP
NUS
ATo
pPorts
02468
Botto
m ITA
OECD PR
TCA
NFR
AES
PDE
UGB
RUS
AJP
NTo
p
Air transport
0
2
4
6
8
Bott…
ITA
CAN
OECD PR
TGB
RFR
AES
PDE
UUS
AJP
NTo
p
Railroad
Investment by subnationalgovernments is falling
Source: OECD General Government Accounts database.40
Create as planned a technical support unit for public investment using existing administrative structures and ensure it is well staffed.
Public investment, EUR billions
0
10
20
30
40
50
60
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Local government Central government
Absorption of EU funds is low,especially in the south
Source: European Commission, Open Data Portal for the European Structural and Investment Funds. (https://cohesiondata.ec.europa.eu/)
41
Rationalise and improve coordination among bodies involved in regional development policies by strengthening the role and expertise of central government bodies.
Spending of EU funds 2014-2020 programming period,at end September 2018, % of planned investments
0
5
10
15
20
25
30
35
0
5
10
15
20
25
30
35
National South Centre and North
Metropolitan areas’ administration is somewhat fragmented, weighing on efficiency
Source: OECD Metropolitan Areas database; and OECD Regional Statistics database.42
Empower metropolitan governance bodies with the transfer of some of the powers of regions and provinces.
Rome
Milan
NaplesTurin
Palermo
GenovaFlorence
Bari Bologna
Catania
Venice
0
5
10
15
20
25
0
5
10
15
20
25
LowestOECD -
IRL
GBR JPN CAN ITA USA DEU ESP OECD PRT FRA HighestOECD -
CZE
Number of municipalities in metropolitan areas per 100 000 inhabitants, 2014
Main recommendationsImproving public investment and regional
development policies Create as planned a technical support unit for public investment using existing
administrative structures and ensure it is well staffed.
Simplify the most complex aspects of the public procurement code, but protect the powers of the anticorruption authority.
Develop a comprehensive public investment and spatial plan linking infrastructure developments with land use management.
Rationalise and improve coordination among bodies involved in regional development policies by strengthening the role and expertise of central government bodies
Empower metropolitan governance bodies with the transfer of some of the powers of regions and provinces.
More in ‘Key Policy Insights’and Chapter 1: Tackling Italy’s social and regional divide
43
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www.oecd.org/eco/surveys/italy-economic-snapshot/