Economic Development of Italy and Spain

8/3/2019 Economic Development of Italy and Spain

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ITALY

Italy's economy in the 21st century has been mixed, experiencing both relative economic growthand stagnation, recession and stability. As of the 2000s recession, more notably the 2008 recessionand the 2009 recession, Italy was one of the few countries whose economy did not contract

dramatically, and kept a relatively stable economic growth, yet figures for economic growth in 2009and 2010 have showed a negative average, ranging from around -1% to -5%.The late-first decade ofthe 21st century recession has also gripped Italy; car sales in Italy have fallen by almost 20 percentover each of the past two months. Italy's car workers' union said; "The situation is evidently moreserious than had been understood." On 10 July 2008 economic think tank ISAE lowered its growthforecast for Italy to 0.4 percent from 0.5 percent and cut the 2009 outlook to 0.7 percent from 1.2percent.Analysts have predicted Italy had entered a recession in the second quarter or would enterone by the end of the year with business confidence at its lowest levels since the September 11attacks. Italy's economy contracted by 0.3 percent in the second quarter of 2008.

In the 4 quarters of 2006, Italy's growth rates were approximately these: +0.6% in the Q1, +0.6% inthe Q2, +0.65% in the Q3 and 1% in the Q4.

Similarly, in 2007's 4 quarters, these were the figures: +0.25% in the Q1, +0.1% in the Q2, +0.2% inthe Q3, and -0.5% in the Q4.

In the 4 of 2008's quarters, the results, mainly negative, were these: +0.5% in the Q1, -0.6% in theQ2, -0.65% in the Q3 and -2.2% in the Q4.

In the Q1 (1st quarter) of 2009, Italy's economy contracted by 4.9%, a greater contraction than thepredictions of the Italian government, which believed that it would be of at most 4.8%. The Q2 (2ndquarter) saw a smaller decrease in GDP, more or less that of -1%, and by the Q3 (3rd quarter), theeconomy began to re-grow slightly, with GDP increase rates of about +0.2% to +0.6%. Yet, in the Q4

(4th quarter) of the year 2009, Italy's GDP growth was of -0.2%.

ISTAT predicts that Italy's falling economic growth rate is due to a general decrease in the country'sindustrial production and exports.However, the Government of Italy believes that 2010 and beyondwill bring higher growth rates: anything from circa +0.7% - +1.1%.

ITALYS CURRENT GDP GROWTH RATE

The Gross Domestic Product (GDP) in Italy contracted 0.2 percent in the third quarter of 2011 overthe previous quarter. Historically, from 1981 until 2011, Italy's average quarterly GDP Growth was

0.35 percent reaching an historical high of 2.20 percent in December of 1983 and a record low of -3.00 percent in March of 2009. Italy is a member of the G8 group of leading industrialized countries.Italy has a diversified industrial economy, which is divided into a developed industrial north,dominated by private companies, and a less-developed, welfare-dependent, agricultural south, withhigh unemployment. The Italian economy is driven in large part by the manufacture of high-qualityconsumer goods produced by small and medium-sized enterprises. This page includes: Italy GDPGrowth Rate chart, historical data, forecasts and news. Data is also available for Italy GDP AnnualGrowth Rate, which measures growth over a full economic year.


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In a broad sense we can say that Italys Growth is zero and has been so for ten years after a short

economic boom in 80/90s. This is Italy's biggest problem and its government is urged to come upwith an economic development plan. Tourists come from abroad for a large part and as such this

industry is less affected by Italy's troubles, though it will suffer from the general European crisis.

Italy has a diversified industrial economy with high gross domestic product (GDP) per capita and

developed infrastructure. According to the International Monetary Fund, the World Bank and the

CIA World Factbook, in 2010 Italy was the seventh-largest economy in the world and the fourth-

largest in Europe in terms of nominal GDP,and the tenth-largest economy in the world and fifth-

largest in Europe in terms of purchasing power parity (PPP) GDP.Italy is member of the Group of

Eight (G8) industrialized nations, the European Union and the OECD.

ITALY CURRENT ACCOUNT BALANCE


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Balance of payment figures:

According to recent balance-of-payments figures calculated by the Bank of Italy, the external deficitis estimated to be around % of GDP lower in both years, due to a smaller deficit in the balance ofprimary income. External balance projections for 2011-12 incorporate the revised primary incomestatistics.(78) Over the forecast horizon, the external deficit is forecast to remain between 3%and 3% of GDP.

LIFE EXPECTANCY AT BIRTH; TOTAL (YEARS) IN ITALY

The Life expectancy at birth; total (years) in Italy was reported at 81.95 in 2008, according to theWorld Bank. Life expectancy at birth indicates the number of years a newborn infant would live ifprevailing patterns of mortality at the time of its birth were to stay the same throughout its life.This

page includes a historical data chart, news and forecats for Life expectancy at birth; total (years) inItaly. Italy is a member of the G8 group of leading industrialized countries. Italy has a diversifiedindustrial economy, which is divided into a developed industrial north, dominated by privatecompanies, and a less-developed, welfare-dependent, agricultural south, with high unemployment.The Italian economy is driven in large part by the manufacture of high-quality consumer goodsproduced by small and medium-sized enterprises.

ITALY POPULATION


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The total population in Italy was last reported at 60.6 million people in 2010 from 50.2 million in1960, changing 21 percent during the last 50 years. Italy has 0.88 percent of the worlds totalpopulation which means that one person in every 114 people on the planet is a resident of Italy.

ITALY UNEMPLOYMENT RATE

The unemployment rate in Italy was last reported at 8.5 percent in October of 2011. From 1983until 2010, Italy's Unemployment Rate averaged 9.00 percent reaching an historical high of 11.50percent in April of 1998 and a record low of 5.70 percent in April of 2007. The labour force isdefined as the number of people employed plus the number unemployed but seeking work. Thenonlabour force includes those who are not looking for work, those who are institutionalised andthose serving in the military.

EUR/USD - EXCHANGE RATE IN ITALY

The euro is the official currency of Italy, which is a member of the European Union. The Euro Arearefers to a currency union among the European Union member states that have adopted the euro astheir sole official currency. In Italy, interest rate decisions are taken by the Governing Council of theEuropean Central Bank. The Euro exchange rate (EURUSD) depreciated 3.38 percent against the USDollar during the last month. During the last 12 months, the Euro exchange rate (EURUSD)depreciated 0.72 percent against the US Dollar. Historically, from 1975 until 2011 the EURUSDexchange averaged 1.18 reaching an historical high of 1.60 in April of 2008 and a record low of 0.64in February of 1985. The Euro spot exchange rate specifies how much one currency, the EUR, is


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currently worth in terms of the other, the USD. While the Euro spot exchange rate is quoted andexchanged in the same day, the Euro forward rate is quoted today but for delivery and payment ona specific future date.

ITALY EXPORTS

Italy exports were worth 32.1 Billion EUR in October of 2011. Italy's major exports are precisionmachinery, motor vehicles (utilitaries, luxury vehicles, motorcycles, scooters), chemicals andelectric goods, but the country's more famous exports are in the fields of food and clothing. Italy'sclosest trade ties are with the other countries of the European Union, with whom it conducts about59% of its total exports. Italy's largest EU trade partners are Germany and France.

ITALY INDUSTRIAL PRODUCTION

Industrial Production in Italy contracted 3.24 percent in October of 2011. Industrial productionmeasures changes in output for the industrial sector of the economy which includes manufacturing,mining, and utilities. Industrial Production is an important indicator for economic forecasting and isoften used to measure inflation pressures as high levels of industrial production can lead to suddenchanges in prices. From 1991 until 2010, Italy's industrial production averaged -0.07 percent


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reaching an historical high of 17.40 percent in August of 1994 and a record low of -25.60 percent inApril of 2009.

ITALY INFLATION RATE

The inflation rate in Italy was last reported at 3.3 percent in November of 2011. From 1997 until 2010, the

average inflation rate in Italy was 2.15 percent reaching an historical high of 4.10 percent in July of 2008

and a record low of 0.00 percent in July of 2009. Inflation rate refers to a general rise in prices measured

against a standard level of purchasing power. The most well known measures of Inflation are the CPI

which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the

domestic economy.

ITALY INTEREST RATE

Italy is a member of the Euro Area, an economic and monetary union (EMU) of European Union(EU) member states that have adopted the euro. The Euro Area benchmark interest rate stands at1.00 percent. in the Euro Area, interest rate decisions are taken by the Governing Council of theEuropean Central Bank. The primary objective of the ECBs monetary policy is to maintain pricestability. The ECBs Governing Council has defined price stability as "a year-on-year increase in theHarmonised Index of Consumer Prices (HICP) for The Euro Area of below 2%. The EuropeanCentral Bank is the sole issuer of banknotes and bank reserves. That means it has the monopolysupplier of the monetary base. By virtue of this monopoly, it can set the conditions at which banks


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borrow from the Central Bank. Therefore it can also influence the conditions at which banks tradewith each other in the money market. in the short run, a change in money market interest ratesinduced by the Central Bank sets in motion a number of mechanisms and actions by economicagents. Ultimately the change will influence developments in economic variables such as output orprices.

GNI; ATLAS METHOD (US DOLLAR) IN ITALY

The GNI; Atlas method (US dollar) in Italy was last reported at 2125844764893.52 in 2010,according to a World Bank report released in 2011. The GNI; Atlas method (US dollar) in Italy wasreported at 2121598030733.95 in 2008, according to the World Bank. GNI (formerly GNP) is thesum of value added by all resident producers plus any product taxes (less subsidies) not included inthe valuation of output plus net receipts of primary income (compensation of employees andproperty income) from abroad. Data are in current U.S. dollars. GNI, calculated in national currency,is usually converted to U.S. dollars at official exchange rates for comparisons across economies,although an alternative rate is used when the official exchange rate is judged to diverge by anexceptionally large margin from the rate actually applied in international transactions. To smooth

fluctuations in prices and exchange rates, a special Atlas method of conversion is used by the WorldBank. This applies a conversion factor that averages the exchange rate for a given year and the twopreceding years, adjusted for differences in rates of inflation between the country, and through2000, the G-5 countries (France, Germany, Japan, the United Kingdom, and the United States). From2001, these countries include the Euro area, Japan, the United Kingdom, and the United States. Thispage includes a historical data chart, news and forecast for GNI; Atlas method (US dollar) in Italy.Italy is a member of the G8 group of leading industrialized countries. Italy has a diversifiedindustrial economy, which is divided into a developed industrial north, dominated by privatecompanies, and a less-developed, welfare-dependent, agricultural south, with high unemployment.The Italian economy is driven in large part by the manufacture of high-quality consumer goodsproduced by small and medium-sized enterprises.


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POVERTY IN ITALY

Istat disseminates the relative and absolute poverty estimations for the households residing inItaly, based on 2009 Households Budget Survey data. Being sample estimations, they are affected by

sampling error: small differences can be not statistically significant.In 2009 the relative poverty incidence was equal to 10.8%, whereas the absolute poverty to 4.7%.Taking into account the sampling error, the phenomenon was stable in comparison with 2008.The South and the Islands confirmed the incidence levels reached in 2008 (22.7% for relativepoverty, 7.7% for absolute poverty) and it showed an increase for the absolute poverty intensity(from 17.3% to 18.8%): the number of absolutely poor households stays almost the same, but theiraverage conditions worsened.The poverty incidence increased, from 2008 to 2009, among the households with a worker asreference person, both in relative (in the Centre from 7.9% to 11.3%) and in absolute terms (at thenational level from 5.9% to 6.9%).

AGRICULTURAL LAND (% OF LAND AREA) IN ITALY

Agricultural land refers to the share of land area that is arable, under permanent crops, and underpermanent pastures. Arable land includes land defined by the FAO as land under temporary crops(double-cropped areas are counted once), temporary meadows for mowing or for pasture, landunder market or kitchen gardens, and land temporarily fallow. Land abandoned as a result ofshifting cultivation is excluded. Land under permanent crops is land cultivated with crops thatoccupy the land for long periods and need not be replanted after each harvest, such as cocoa, coffee,and rubber. This category includes land under flowering shrubs, fruit trees, nut trees, and vines, butexcludes land under trees grown for wood or timber. Permanent pasture is land used for five ormore years for forage, including natural and cultivated crops.This page includes a historical datachart, news and forecats for Agricultural land (% of land area) in Italy. Italy is a member of the G8

group of leading industrialized countries. Italy has a diversified industrial economy, which isdivided into a developed industrial north, dominated by private companies, and a less-developed,welfare-dependent, agricultural south, with high unemployment. The Italian economy is driven inlarge part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises.


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ECONOMIC CONDITION SUMMARY

Rank 8th (nominal) / 10th (PPP)

Currency Euro (EUR), except in Campione d'Italia (CHF)

Fiscal year calendar year

Trade organisations EU, WTO (via EU membership) and OECD

Statistics

GDP$2.055 trillion (2010) (nominal; 8th)

$1.773 trillion (2010)(nominal; 10th)

GDP growth 1.1% (2010)

GDP per capita $35,435 (2009)[3] (nominal; 21st)

$29,109 (2009)

GDP by sectoragriculture: 1.8%; industry: 24.9%; services: 73.3% (2010est.)

Inflation (CPI) 1.4% (2010 est.)

Gini index 36 (2009)

Labour force 25.05 million (2010 est.)

Labour force by occupation services (65.1%), industry (30.7%), agriculture (4.2%) (2005)

Unemployment 8.4% (Feb. 2011)

Average gross salary 2,521 / 3,403 $, monthly (2006)

Average net salary 1,457 / 1,967 $, monthly (2006)Main industries tourism, communications, machinery, steel, chemicals,

pharmaceuticals, food processing, clothing, fashion.

Ease of Doing Business Rank 87th

External

Exports $458.4 billion (2010 est.)

Export goods engineering products, textiles and clothing, productionmachinery, motor vehicles, transport equipment, chemicals.

Main export partners Germany 12.6%, France 11.57%, United States 5.92%, Spain5.69%, United Kingdom 5.13%, Switzerland 4.69% (2009)


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Imports $459.7 billion (2010 est.)Import goods engineering products, chemicals, transport equipment, energy

products, textiles and clothing; food, beverages, and tobacco

Main import partners Germany 16.68%, France 8.82%, China 6.53%, Netherlands5.63%, Spain 4.3%, Russia 4.12%, Belgium 4.08% (2009)

FDI stock $405.1 billion (31 December 2010 est.)

Gross external debt $2.223 trillion (30 June 2010 est.)

Public finances

Public debt 118.1% of GDP (2010 est.)

Revenues $960.1 billion (2009 est.)

Expenses $1.068 trillion (2009 est.)

Economic aid donor: $2.48 billion, 0.15% of GDP (2004)

Credit rating

Standard & Poor's

A (Domestic)

A (Foreign)

AAA (T&C Assessment)

Outlook: Negative

Moody's

A2

Outlook: Stable

Fitch

AA-

Outlook: Positive

Foreign reserves US$165.796 billion (March 2011)

SPAIN

We are well aware, Spain is facing its longest and deepest recession in 50 years. While the depth ofthe recession has been broadly similar to other advanced OECD economies in terms of real GDP, therise in unemployment and the deterioration of government finances have been steeper.

Importantly, the government response has been appropriate, which helped mitigate the worsteffects of the crisis. This includes an ambitious consolidation programme to reduce the publicdeficit and measures to restore confidence to the financial sector, including extensive stress tests onbanks measures to strengthen the resilience of the cajas. Progress was also made on structural

reforms, especially those concerning the labour market.

Despite these encouraging responses, the crisis has left its mark on the Spanish economy. Thedownsizing of the construction sector, while still incomplete, is largely permanent. The currentaccount deficit may have improved, but the debt burden of the private sector, especially amonghouseholds, is still high, limiting the contribution private consumption can make to future economicgrowth.

More recently, the Spanish economy had benefited greatly from the global real estate boom, withconstruction representing an astonishing 16% of GDP and 12% of employment in its final year.


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According to calculations by the German newspaper Die Welt, Spain had been on course to overtakecountries like Germany in per capita income by 2011. However, the downside of the defunct realestate boom was a corresponding rise in the levels of personal debt; as prospective homeownershad struggled to meet asking prices, the average level of household debt tripled in less than adecade. This placed especially great pressure upon lower to middle income groups; by 2005 themedian ratio of indebtedness to income had grown to 125%, due primarily to expensive boom time

mortgages that now often exceed the value of the property. A European Commission forecast hadpredicted Spain would enter a recession by the end of 2008. According to Spains EconomyMinister, Spain faces its deepest recession in half a century. Spain's government forecast theunemployment rate would rise to 16% in 2009. The ESADE business school predicted 20%.

Due to its own economic development and the recent EU enlargements up to 28 members (2007),Spain had a GDP per capita of (105%) of EU average per capita GDP in 2006, which placed it slightlyahead of Italy (103%). As for the extremes within Spain, three regions in 2005 were included in theleading EU group exceeding 125% of the GDP per capita average level: Basque AutonomousCommunity leading with Madrid and Navarre, and one was at the 85% level (Extremadura.According to the growth rates post 2006, noticeable progress from these figures happened untilearly 2008, when the Spanish economy was heavily affected by the puncturing of its propertybubble by the global financial crisis.

The centre-right government of former prime minister Jos Mara Aznar had worked successfully togain admission to the group of countries launching the euro in 1999. Unemployment stood at 7.6%in October 2006, a rate that compared favorably to many other European countries, and especiallywith the early 1990s when it stood at over 20%. Perennial weak points of Spain's economy includehigh inflation, a large underground economy,and an education system which OECD reports placeamong the poorest for developed countries. However, the property bubble that had begun buildingfrom 1997, fed by historically low interest rates and an immense surge in immigration, imploded in2008, leading to a rapidly weakening economy and soaring unemployment.

SPAIN UNEMPLOYMENT RATE


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The unemployment rate in Spain was last reported at 21.5 percent in the third quarter of 2011.From 1983 until 2010, Spain's Unemployment Rate averaged 14.20 percent reaching an historicalhigh of 20.00 percent in June of 2010 and a record low of 8.00 percent in March of 2007. The labourforce is defined as the number of people employed plus the number unemployed but seeking work.The nonlabour force includes those who are not looking for work, those who are institutionalisedand those serving in the military.

SPAIN INFLATION RATE

The inflation rate in Spain was last reported at 2.9 percent in November of 2011. From 2002 until2010, the average inflation rate in Spain was 2.78 percent reaching an historical high of 5.30percent in July of 2008 and a record low of -1.40 percent in July of 2009. Inflation rate refers to a

general rise in prices measured against a standard level of purchasing power. The most well knownmeasures of Inflation are the CPI which measures consumer prices, and the GDP deflator, whichmeasures inflation in the whole of the domestic economy.

SPAIN CURRENT ACCOUNT


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Spain reported a current account deficit equivalent to 3.6 Billions EUR in September of 2011. Spainmajor exports are: wine, machinery, motor vehicles and foodstuffs. Spain imports mainlymachinery and equipment, fuels, chemicals, semi finished goods, foodstuffs and consumer goods.The EU accounts for 70 percent of Spain's exports and 59 percent of imports, the most importanttrading partners being France and Germany.

SPAIN BALANCE OF TRADE

Spain reported a trade deficit equivalent to 3632 Million EUR in October of 2011. Spain majorexports are: wine, machinery, motor vehicles and foodstuffs. Spain imports mainly machinery andequipment, fuels, chemicals, semi finished goods, foodstuffs and consumer goods. The EU accountsfor 70 percent of Spain's exports and 59 percent of imports, the most important trading partnersbeing France and Germany.

ADJUSTED NET NATIONAL INCOME (ANNUAL % GROWTH) IN SPAIN

The Adjusted net national income (annual % growth) in Spain was 0.91 in 2009, according to aWorld Bank report, published in 2010. The Adjusted net national income (annual % growth) inSpain was reported at -1.29 in 2008, according to the World Bank. Spain's economy is the fifthlargest in Europe. Spain is part of the European Union since 1986 which required the country toopen its economy to trade and investment. The Spanish economy grew every year from 1994through 2008 before entering a recession that started in the third quarter of 2008.


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SPAIN INTEREST RATE

Spain is a member of the Euro Area, an economic and monetary union (EMU) of European Union(EU) member states that have adopted the euro. The Euro Area benchmark interest rate stands at1.00 percent. in the Euro Area, interest rate decisions are taken by the Governing Council of theEuropean Central Bank. The primary objective of the ECBs monetary policy is to maintain pricestability. The ECBs Governing Council has defined price stability as "a year-on-year increase in theHarmonised Index of Consumer Prices (HICP) for The Euro Area of below 2%. The EuropeanCentral Bank is the sole issuer of banknotes and bank reserves. That means it has the monopolysupplier of the monetary base. By virtue of this monopoly, it can set the conditions at which banksborrow from the Central Bank. Therefore it can also influence the conditions at which banks trade

with each other in the money market. in the short run, a change in money market interest ratesinduced by the Central Bank sets in motion a number of mechanisms and actions by economicagents. Ultimately the change will influence developments in economic variables such as output orprices.


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SPAIN EXPORTS

Spain exports were worth 19394 Millions EUR in October of 2011. Spain major exports are:machinery, motor vehicles, fuels, chemicals, and semi-finished goods and foodstuffs. Spain is alsothe third largest wine exporter in the world. The EU accounts for 70 percent of Spain's exports, themost important trading partners being France and Germany.

SPAIN INDUSTRIAL PRODUCTION

Industrial Production in Spain declined 4.2 percent in October of 2011. Industrial productionmeasures changes in output for the industrial sector of the economy which includes manufacturing,mining, and utilities. Industrial Production is an important indicator for economic forecasting and isoften used to measure inflation pressures as high levels of industrial production can lead to sudden

changes in prices.

SPAIN POPULATION


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The total population in Spain was last reported at 46.1 million people in 2010 from 30.5 million in1960, changing 51 percent during the last 50 years. Spain has 0.67 percent of the worlds totalpopulation which means that one person in every 150 people on the planet is a resident of Spain.

SPAIN IMPORTS

Spain imports were worth 23026 Million EUR in October of 2011. Spain major imports aremachinery and equipment, fuels, chemicals, semi finished goods, foodstuffs and consumer goods. Itsprincipal import partners are European Union countries (Germany, France, Italy, UK, Netherlands)and China.

GROSS SAVINGS (% OF GDP) IN SPAIN

The Gross savings (% of GDP) in Spain was reported at 20.20 in 2008, according to the World Bank.Gross savings are calculated as gross national income less total consumption, plus net transfers.Spain's economy is the fifth largest in Europe. Spain is part of the European Union since 1986 which


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required the country to open its economy to trade and investment. The Spanish economy grewevery year from 1994 through 2008 before entering a recession that started in the third quarter of2008.

Documents

Economic Development of Italy and Spain