The contraction in global economic activity was greater last year than in 2008. The signs of recovery that emerged during the year differed in intensity from country to country. The decline in output was larger in Italy than in the other major euro-area countries.
According to Svimez estimates, real GDP fell in Campania by 5.4 per cent last year, compared with declines of 5.0 per cent nationwide and 4.5 per cent in the South and Islands. Both in the years preceding the crisis and during the recession, Campania's GDP growth rate was one of the lowest among the underdeveloped regions of Europe.
The labour market and economic activity. - Last year the fall in output was accompanied by a further marked deterioration in the employment situation. Employment fell by some 70,000 compared with 2008 and by more than 100,000 compared with 2007; the latter contraction amounted to almost half of the overall employment loss in the South and Islands.
The loss of jobs was especially severe among the younger strata of the population and workers with low levels of educational attainment.
A significant share of the employed population worked fewer hours and received a lower wage than in the previous year.
The rise in the unemployment rate was curbed by the spread of discouragement from undertaking active job-search actions. A broader measure of the imbalances between demand and supply in the labour market, which also takes workers receiving wage supplementation and discouraged workers into account, would be more than 50 per cent higher than the official unemployment rate.
For the first time in the decade, the fall in unemployment involved all sectors of production. It was especially large in industry, whose share of employment in Campania is 15 per cent but which accounted for 38 per cent of the fall in employment.
Between the first quarter of 2009 and the first quarter of 2010, the qualitative indicators of industrial production in Campania recouped only half of the loss recorded in the previous twelve months. Industrial turnover, monitored by the Bank of Italy's survey on a sample of regional firms with 20 or more workers, fell by 8.8 per cent at constant prices; the forecast improvement in 2010 is expected to recoup only two thirds of that loss. Investment, which fell considerably last year, is not expected to expand in 2010.
The results of the last two years and medium-term projections for the levels of activity of the firms surveyed show disparate trends: 44 per cent of industrial firms, mostly in food processing but also including some companies in high-tech sectors, have already surpassed their pre-crisis level of turnover, while about one quarter do not to reach that level even in 2012.
The value of exports of manufactures fell by 16.9 per cent, despite the continuing increase in exports of food products. More than a third of the decline is due to the motor vehicle sector, which was affected by the contraction in activity in the main factories in Campania.
Responses to the market difficulties, in the form of significant product and process innovation, changes in outlet markets and acquisitions of competitors or suppliers, appear limited to a very small share of firms. Employment held up better in the companies that had experimented with at least one of these strategies in the years preceding the crisis.
Construction continued to be affected by slack public investment, which was compensated for only in part by a pick-up in private building.
Many of the public works begun during the decade are projects to upgrade transport infrastructure. Campania ranks among the top regions of Italy in terms of railway infrastructure endowment.
In the housing market, the number of sales diminished for the fourth consecutive year; prices fell in the second half of the year, although they held up better than at national level.
The further decreases in household consumption, overnight stays by tourists and freight traffic led to another reduction in activity in private services.
As in 2008, the profitability of regional firms worsened considerably, falling to the lowest levels since 1993. In 2009 nearly one firm in four among those interviewed in sample surveys expected to make a loss for the year.
The credit market. - Bank lending to firms continued to slow. In December the growth in loans, adjusted for securitizations, came to barely 0.4 per cent compared with the end of 2008 and the volume of credit lines granted had diminished.
The restrictiveness of credit supply policies showed signs of easying in the second half of the year. Prudence in lending is partly a consequence of the appreciable rise in default risk: the share of loans reclassified as bad debts almost doubled in 2009, and there were also significant increases in loans not classified as bad debts but characterized by repayment difficulty. Firms' propensity to borrow in order to carry out investment projects remains low.
In the Bank of Italy sample survey conducted between February and April 2010 among firms with 20 or more workers, from October 2009 onwards 22 per cent of the firms reported a tightening of overall borrowing conditions (compared with 33 per cent in last year's survey), while 7 per cent reported having received requests for partial or full repayment of outstanding debts (compared with 10 per cent last year).
The credit tightening did not affect all firms uniformly. According to data on a sample of Campania's firms reported in the Central Credit Register, as of the end of 2009 loans to riskier firms (with higher debt burdens and lower profitability) had decreased, while loans to low-risk firms continued to grow, albeit at a slower pace. By the same token, the slowdown in lending was less marked for firms coming out of a phase of investment and turnover growth.
Trends also differed according to the type of bank: lending growth was below average for banks belonging to Italy's top five banking groups.
The spread between the average cost of short-term credit for firms in Campania and the national average, calculated controlling for the sectoral and size composition of the productive structure, remained about the same as in 2008 (1.2 percentage points). Greater uncertainty in assessing the creditworthiness of Campania's firms and the longer time needed to recover bad debts contribute to this gap. Eliminating some structural weaknesses of the regional system of collective loan guarantee consortiums could improve the conditions of access to credit, as is happening in other parts of Italy.
The growth in lending to households also slowed sharply last year, from 8.2 to 4.2 per cent. New medium- and long-term loans both for house purchases and for purchases of durable consumer goods diminished. Repayment difficulties and bad debts increased.
Local government expenditure and public services. - Between 2006 and 2008 the expenditure of local government bodies in Campania, net of interest payments, grew by an average of 4.4 per cent per year, compared with 3.2 per cent for the ordinary-statute regions as a group. Primary current expenditure continued to outpace capital expenditure.
According to provisional data, some of the main expenditure components, including investment and health care, tended to level off in 2009.
In the opinion of the central government, progress towards fulfilling the commitments to contain health care costs, made by Region of Campania with the deficit correction plan of March 2007, was not consistent with attaining financial equilibrium as scheduled. Accordingly, the regional health service was put under special administration.
Campania's local government debt grew from €12.1 billion at the end of 2008 to €13.1 billion at the end of 2009. The latter figure was equal to 13.9 per cent of regional GDP, about double the overall proportion for the other Italian regions.
Local government bodies' trade credit payable in Campania is also among the highest in Italy. Payables to suppliers of the regional health service alone amounted to some €5 billion in 2008. As of the end of 2009, the nominal value of receivables from the health sector and local government entities in Campania that firms had assigned to financial intermediaries amounted to €2.2 billion, or more than 28 per cent of the national total of such assigned claims.
Turning to tax revenues, most of the local government bodies in the region applied their own taxes at the maximum rates permitted by law. The scope for increasing revenue by raising taxes is therefore very limited.
In numerous activities delegated to the public sector, from waste management to childcare services, education and assistance for the elderly, the quality of services provided in Campania is below the Italian average. In these sectors the intermediate check on the so-called service objectives found progress to be slow and service levels often very far from the targets.
In several cases the deficiency in the quality of services cannot be traced to a shortage of financial resources. This is particularly evident in health care, where assistance whose quality is below the average for the other regions goes together with per capita expenditure, obtained by weighting the population by age groups, not lower than the national average.
