In 2005 the Tuscan economy stagnated following the weak recovery of the previous year. The Regional Institute for Economic Programming in Tuscany, IRPET, estimates that GDP growth was slightly negative, as opposed to nil in the country as a whole. A few signs of improvement emerged towards the end of the year.
The trend in consumption, particularly collective consumption, made a small positive contribution to growth, offsetting only part of the negative contribution of investment spending and net export demand.
In industry the protracted weakness sharpened; factories are undergoing a selection process at present, which tends to reward the ones in the top quality range and the most innovative. The fashion industry continued to encounter difficulties and the engineering industry experienced a slowdown.
Conditions were still favourable in the construction industry, with little change from the previous year. The positive trend in public works and the private building sector continued, although the latter showed some signs of a slowdown, particularly in non-residential building. Although housing demand was still strong, property prices and sales decelerated.
The service sector picked up slightly. The retail trade showed signs of a recovery, albeit a modest one, and in the tourism industry overnight stays began to increase once more. Port and airport traffic grew steadily.
Employment growth continued, although at a slower pace than in the previous year. Part of the gain was due to the regularization of immigrant workers. The unemployment rate remained low.
In 2005 credit to residents expanded rapidly, as in the previous two years. The largest demand came again from consumer households to finance home purchases or durable goods. Loans to firms slowed, particularly those to small factories. Owing to the lack of widespread investment in the region, firms used credit to lengthen the maturity of their liabilities and to meet the requirement associated with the small rise in orders towards the end of the year.
The quality of credit remained unchanged. As in previous years the flow of new bad debts was less than one percentage point higher than the stock at the beginning of the period.
Savers’ investment choices generally confirmed a preference for liquid assets and an aversion to risk, despite the higher opportunity cost of holding cash and the strong stock market performance.
Non-local banks expanded their share of the loan and deposit markets, while that of the cooperative banks remained virtually stationary.
