The global contraction, which caused the largest fall in Italian GDP since the Second World War, continued to affect the Sicilian economy last year, with activity down in all the main sectors.
In particular, in the first half of the year industrial orders and production continued the decline that had characterized all of 2008; subsequently both indicators remained at very low levels. Investment, turnover and profit margins decreased for the firms sampled by the Bank of Italy's survey. However, firms are cautiously optimistic for the future, with more than half the sample expecting turnover to return to its 2007 level by 2012.
Construction activity diminished, particularly for firms that operate in the public works sector. In the housing market, the number of sales fell for the fourth successive year.
Developments were also negative for non-financial private services, with turnover and investment falling for many firms. Retail sales decreased; for food products, the decline intensified with respect to 2008. In tourism, the number of visitors and overnight stays diminished both for Italians and, more sharply, for foreigners. Spending by foreign tourists fell significantly for the second consecutive year.
Reflecting the collapse of world trade, Sicily's foreign trade contracted by more than a third; all the main product sectors recorded decreases.
Employment fell for the third successive year, particularly in industry and construction; the situations of greatest difficulty involved young workers and those with low levels of education.
Reflecting the unfavourable performance of the real economy, bank lending to households and firms continued to slow, partly in response to demand-side factors connected with the downsizing of investment plans, for firms, and the contraction in house sales, for households. Banks expect the demand for loans to revive in 2010 and the tightening of lending standards to end after already lessening in intensity in 2009.
The interest rates on short-term bank loans came down rapidly, reflecting the previous reductions in official rates.
The effects of the recession were also seen in the quality of loans: new bad debts increased and the volume of loans characterized by repayment difficulties grew.
Bank deposits expanded more slowly than in 2008. There was a sharp contraction in repos in concomitance with the decline in yields; the consequent reduction in the opportunity cost of holding liquid balances induced savers to increase their holdings in current accounts.
