The recession that began in Sardinia in 2008 worsened in 2009 as the effects of the global economic and financial crisis unfolded. According to Svimez data, the contraction in GDP amounted to 4.3 per cent (against 1.6 per cent in 2008), slightly less than the national average. Industry and construction accounted for most of the decline in output. The state of the labour market deteriorated steadily.
The signals of recovery observed at national level at the beginning of 2010 remain particularly weak in Sardinia; the outlook is subject to a high degree of uncertainty.
Domestic demand weakened again in 2009 and foreign orders slumped. Industrial production contracted significantly. Firms cut back on capital spending; their earning capacity diminished. The cyclical difficulties were particularly intense for the chemicals and metal products industries, which are more vulnerable to the international economic cycle. There were major corporate crises in these sectors and widespread recourse to income-support measures.
Foreign trade fell by almost a half in value terms, in connection with the contraction in trade in chemicals and refined petroleum products. Exports of basic metal products shrank considerably and foreign demand for traditional manufacturing products weakened.
The decline in construction activity weighed on the cyclical situation. Residential building diminished and investment in public works fell again. Only in the industrial and commercial building sector did activity continue to grow at a modest rate, slowing with respect to 2008.
Services, hit less directly by the crisis, suffered owing to the weakening of household consumption. Activity contracted in distribution and commerce. In tourism, the expansion recorded in previous years came to a halt. Transport of goods was down sharply.
The labour market felt the impact of the deep recession. The decline in employment accelerated and there was a further increase in the unemployment rate, attenuated by recourse to wage supplementation and by the fall in the participation rate. The effects were especially severe for workers on fixed-term contracts, younger workers and persons with a low level of educational attainment.
The recession affected the growth in bank lending. Lending to customers resident in the region slowed significantly, though it again outpaced the national average. According to the latest available data, there was a slight pick-up in the first quarter of 2010.
Lending to households continued to be affected by slack demand for loans for house purchases, despite the appreciable decline in the rates on mortgage loans. Consumer credit expanded again, particularly credit granted by non-bank intermediaries.
Lending to the regions' firms decelerated. Lending to small enterprises declined, while credit growth remained positive for medium-sized and large companies. By sector, lending diminished for manufacturing, slowed appreciably for construction and basically stagnated for services.
Firms' demand for credit reflected smaller borrowing requirements for investment. On the supply side, the tightening reported since the last quarter of 2008 became less intense during the year. Banks' greater caution mainly took the form of an increase in the spreads on corporate loans, particularly to high-risk firms.
In 2009 there was a general reduction in the interest rates on bank loans to customers in the region.
Loan quality deteriorated further. The ratio of new bad debts to outstanding loans rose for both households and firms. The amount of loans to customers in temporary difficulty also increased significantly.
Bank funding in the region continued to expand, owing to the increase in households' deposits. Among other types of financial investment, the value of government securities held by Sardinian customers at banks diminished, while that of equities, bonds and asset management products grew.
