The economy is slowing down but the Italian industry stays strong – and remains in need of good policies
Autumn seems to be bringing a great deal of uncertainty about the Italian economy. Latest data records a GDP decrease of 0.4% in the second quarter, and thus a slower growth this year – 0.7% (rather than 0.8%) with an estimated 1% in 2024 (lower than the goal of 1.5% set by the DEF – the Italian Treasury’s Document of economy and finance). True, the government is still holding on to the forecast 1% for 2023, but this may well be amended over the next few weeks, as the new DEF is drafted. Why this slowdown? Weak internal demand (also due to the high inflation level), a contraction in exports, the high cost of money, and a general climate of uncertainty restraining corporate investments. All factors that could also weigh down the third quarter’s data, already negatively affected by a tourist season that turned out to be less thriving than expected.
No fears of a recession, however – “There won’t be a recession, despite all this. At most, a recalibration of markets and priorities”, asserts Valter Caiumi, president of entrepreneurial association Confindustria Emilia, leader of the entrepreneurs based in one of the most dynamic areas of Italy (interview by Dario Di Vico on Corriere Economia, 4 September). Yet, many believe that the slowdown will continue and entrepreneurs and bankers expressed much concern at the traditional Forum held at the European House in Cernobbio in early September.
Concerns that are reflected in Istat’s business confidence index, which in August fell to 106.8 (the lowest rate since November 2022) from a previous rate of 108.9 – a heavy setback due, according to Istat, “to a general decline in all the economic segments analysed”, from manufacturing to the service industry.
Lack of confidence, limited investments and prudent consumption are all stunting the economic growth.
Moreover, the German recession is also having a negative impact on the European and international economies, including the Italian one, which strongly relies on export (Italian manufacturing has close ties with the German markets, starting with automotive supply chains). The situation is further exacerbated by a struggling Chinese economy, geo-political turmoil aggravated by the ongoing war in Ukraine, the rates set by FED and ECB to slow down inflation, tensions concerning the environment, and, more in general, the environmental and digital twin transition, which is subjecting all production, distribution and consumption cycles to intensely tumultuous reorganisations. Besides, however positive this transition period will prove to be, striving for a better future entails economic and social costs to be paid straight away.
In any case, uncertain times are never conducive to a good economy, at least in the short term.
So, how are things really, when looked at from a wider perspective?
Ignoring our current contingencies and focusing on the underlying data, it’s worth remembering – precisely in such worrying and anxious times – that apart from this negative, or at least not brilliant, state of affairs, over the long period succeeding the 2008 great financial crisis the Italian economy, driven by the industrial sector, succeeded nonetheless in building solid foundations for development. Foundations on which we need to lean now, to glimpse a way out from the current slowdown through forward-looking decisions pertaining investments and growth.
What kind of foundations? Well, a radical technological overhaul in both products and production methods, thanks to hefty investments facilitated by an aptly implemented fiscal stimulus; greater attention to quality; a wider interest in new international markets, especially global niches with higher added value; the unique ability to define new processes able to hold together manufacturing, services and high-tech research; the digital “paradigm shift” of data-driven enterprises. And, further, a responsible attitude towards both environmental and social sustainability, intended not as a mere communication and marketing ruse or a cunning greenwashing strategy, but as a genuine key competitive asset distinguishing the best ‘made in Italy’ goods.
The most technologically advanced Italian enterprises have fully embraced this change (a generational shift contributed to this, too). This kind of attitude has led to their growth, turning them into leading manufacturers at the head of sophisticated supply chains and, nowadays, into successful players in the reshoring process, which sees Europe’s comeback as a vast high-quality manufacturing platform. Moreover, this approach has led to new and better collaborations with universities, so as to best harness the benefits of the “knowledge economy” and the tools offered by Artificial Intelligence, and is driving long-term development in a number of manufacturing sectors, such as the mechanics and mechatronics, chemical and pharmaceutical, life sciences and agro-food, automotive and rubber, aerospace and shipbuilding, transport and construction systems, furnishing and textile/clothing industries.
These are key strengths within an integrated relationship network – guarantees that, looking beyond our current struggling economy, Italian enterprises do have a future and are able to continue driving the country’s growth.
We need, however, apt national and European political decisions and governmental actions. We need open-minded industrial policies far from statist and protectionist lures; fiscal policies focused on innovation rather than on rewarding politically influential corporations; security policies concerning energy and the provision of strategic raw materials; well-defined, long-term educational and training pathways; and the implementation of all those reforms (affecting public administration, legal processes, schools, the employment market, etc.) that we’ve been merely debating for far too long.
The PNRR (Italian recovery and resilience plan) was set up as a political and investment tool to enhance infrastructures and reforms, and not making full use of it would be a big mistake.
When responsibly pondering the future of the Italian economy (and thus that of the new generations), it’s worth bearing in mind the Il Sole24Ore‘s concise summary of the results yielded by a lengthy study on innovative businesses: “Italian ingenuity is a true fact. But without research, management and a financial structure, it won’t go far.” Here we are then – these are the themes that should inform future political decisions.
(photo: Getty Images)
Autumn seems to be bringing a great deal of uncertainty about the Italian economy. Latest data records a GDP decrease of 0.4% in the second quarter, and thus a slower growth this year – 0.7% (rather than 0.8%) with an estimated 1% in 2024 (lower than the goal of 1.5% set by the DEF – the Italian Treasury’s Document of economy and finance). True, the government is still holding on to the forecast 1% for 2023, but this may well be amended over the next few weeks, as the new DEF is drafted. Why this slowdown? Weak internal demand (also due to the high inflation level), a contraction in exports, the high cost of money, and a general climate of uncertainty restraining corporate investments. All factors that could also weigh down the third quarter’s data, already negatively affected by a tourist season that turned out to be less thriving than expected.
No fears of a recession, however – “There won’t be a recession, despite all this. At most, a recalibration of markets and priorities”, asserts Valter Caiumi, president of entrepreneurial association Confindustria Emilia, leader of the entrepreneurs based in one of the most dynamic areas of Italy (interview by Dario Di Vico on Corriere Economia, 4 September). Yet, many believe that the slowdown will continue and entrepreneurs and bankers expressed much concern at the traditional Forum held at the European House in Cernobbio in early September.
Concerns that are reflected in Istat’s business confidence index, which in August fell to 106.8 (the lowest rate since November 2022) from a previous rate of 108.9 – a heavy setback due, according to Istat, “to a general decline in all the economic segments analysed”, from manufacturing to the service industry.
Lack of confidence, limited investments and prudent consumption are all stunting the economic growth.
Moreover, the German recession is also having a negative impact on the European and international economies, including the Italian one, which strongly relies on export (Italian manufacturing has close ties with the German markets, starting with automotive supply chains). The situation is further exacerbated by a struggling Chinese economy, geo-political turmoil aggravated by the ongoing war in Ukraine, the rates set by FED and ECB to slow down inflation, tensions concerning the environment, and, more in general, the environmental and digital twin transition, which is subjecting all production, distribution and consumption cycles to intensely tumultuous reorganisations. Besides, however positive this transition period will prove to be, striving for a better future entails economic and social costs to be paid straight away.
In any case, uncertain times are never conducive to a good economy, at least in the short term.
So, how are things really, when looked at from a wider perspective?
Ignoring our current contingencies and focusing on the underlying data, it’s worth remembering – precisely in such worrying and anxious times – that apart from this negative, or at least not brilliant, state of affairs, over the long period succeeding the 2008 great financial crisis the Italian economy, driven by the industrial sector, succeeded nonetheless in building solid foundations for development. Foundations on which we need to lean now, to glimpse a way out from the current slowdown through forward-looking decisions pertaining investments and growth.
What kind of foundations? Well, a radical technological overhaul in both products and production methods, thanks to hefty investments facilitated by an aptly implemented fiscal stimulus; greater attention to quality; a wider interest in new international markets, especially global niches with higher added value; the unique ability to define new processes able to hold together manufacturing, services and high-tech research; the digital “paradigm shift” of data-driven enterprises. And, further, a responsible attitude towards both environmental and social sustainability, intended not as a mere communication and marketing ruse or a cunning greenwashing strategy, but as a genuine key competitive asset distinguishing the best ‘made in Italy’ goods.
The most technologically advanced Italian enterprises have fully embraced this change (a generational shift contributed to this, too). This kind of attitude has led to their growth, turning them into leading manufacturers at the head of sophisticated supply chains and, nowadays, into successful players in the reshoring process, which sees Europe’s comeback as a vast high-quality manufacturing platform. Moreover, this approach has led to new and better collaborations with universities, so as to best harness the benefits of the “knowledge economy” and the tools offered by Artificial Intelligence, and is driving long-term development in a number of manufacturing sectors, such as the mechanics and mechatronics, chemical and pharmaceutical, life sciences and agro-food, automotive and rubber, aerospace and shipbuilding, transport and construction systems, furnishing and textile/clothing industries.
These are key strengths within an integrated relationship network – guarantees that, looking beyond our current struggling economy, Italian enterprises do have a future and are able to continue driving the country’s growth.
We need, however, apt national and European political decisions and governmental actions. We need open-minded industrial policies far from statist and protectionist lures; fiscal policies focused on innovation rather than on rewarding politically influential corporations; security policies concerning energy and the provision of strategic raw materials; well-defined, long-term educational and training pathways; and the implementation of all those reforms (affecting public administration, legal processes, schools, the employment market, etc.) that we’ve been merely debating for far too long.
The PNRR (Italian recovery and resilience plan) was set up as a political and investment tool to enhance infrastructures and reforms, and not making full use of it would be a big mistake.
When responsibly pondering the future of the Italian economy (and thus that of the new generations), it’s worth bearing in mind the Il Sole24Ore‘s concise summary of the results yielded by a lengthy study on innovative businesses: “Italian ingenuity is a true fact. But without research, management and a financial structure, it won’t go far.” Here we are then – these are the themes that should inform future political decisions.
(photo: Getty Images)