In 2005 economic activity slowed in Trentino-Alto Adige. The Statistics Office of the autonomous province of Trento and the Provincial Statistics Institute of Bolzano estimate that regional GDP growth exceeded the national average. The main contribution came from the tourism and construction branches and their induct and from the general improvement in the performance of the region’s industry in the second half of the year. Exports grew at a slightly faster pace than in the country as a whole.
In industry, although the level of orders was generally modest it did increase progressively in the course of the second half of the year. Investment held steady. The number of firms recording a profit increased.
The protracted expansion in the construction industry, which had resulted in high levels of output, showed some signs of slowing. Residential building continued to perform well, with house prices still rising, albeit not as fast as in 2004. After the rapid expansion of previous years, there was a slowdown in the volume of public works projects allocated during the year.
The regional tourist industry recorded a further increase in overnight stays thanks to the good weather and the high quality of the accommodation on offer.
Retail and wholesale trade, on the other hand, were adversely affected by the protracted weakness of consumption, with household spending stationary at the levels of 2004. The trend of purchases of durable goods was more favourable; they were increasingly financed with consumer credit.
Employment continued to rise, although at a slower pace than in 2004. Compared with recent years, there has been a slight downturn in the participation rate due to the contraction in the female labour force. With the growth in the labour force outpacing that in employment, the unemployment rate rose slightly, although it remained the lowest in the country.
Bank lending to residents in the region continued to expand rapidly, exceeding the national average. There was strong demand for loans by consumer households, either for home purchases and renovation or to finance durable goods. The expansion in credit to firms accelerated, driven by the demand for finance of large corporations. After three years of modest growth, credit to manufacturing picked up, while lending to the construction industry slackened. The share of loans with extended maturity, mainly at variable interest rates, continued to rise.
There were no significant changes in the quality of credit at the regional level. Performances varied considerably at the provincial level, however, with an increase in the flow of new bad debts in the province of Bolzano and a decline in Trento.
Households in Trentino-Alto Adige continued to invest their savings preferably in liquid financial instruments and low-risk shares. The volume of securities deposited in safe-keeping with the banks and of funds in asset management declined further; investments in deposits and bank bonds increased.
