The economy in Trentino Alto Adige continued the recovery that had begun in the second half of 2009, but the upswing was weak, and its future prospects remain uncertain. According to estimates by Prometeia, gross domestic product expanded by 1.3 per cent, in line with the national average but lower than the figure for the North-East.
Manufacturing, which along with construction was the sector hit hardest by the recession, benefited last year from an increase in orders, led by the export component. Industrial production remained at levels that businesses judge to be lower than normal. The exports of Bolzano province returned to their pre-crisis levels, while in Trento the recovery is not yet complete despite a substantial gain in sales abroad. After the contraction in capital spending registered in 2009, manufacturers increased their investment last year, although investment plans for 2011 remain prudent, held back by uncertainty over the cyclical outlook.
Construction activity remained slack, with value added again contracting, though less sharply than in 2009. The real estate market continued to stagnate in Trento while showing signs of recovery in Bolzano.
After two years of decline, value added in the service sector turned back upwards in 2010. Household consumption remained basically flat. In the durable goods sector, a downturn in new vehicle registrations in connection with the termination of tax incentives was offset by the recovery in sales of furniture and appliances. Tourism - which had sustained the economy in both provinces during the recession - confirmed the large number of overnight stays recorded in 2009, thanks especially to foreign tourists. The investment made in the past decade in upgrading structures and services provided a competitive edge during the worst of the recession.
Employment growth remained weak, held back by the large number of workers receiving wage supplementation. The prospects for younger workers, whose contribution to employment growth has been steadily negative for the last five years, still appear difficult. Labour market participation, already very high, rose further. In Trento this increased labour supply resulted in a significant rise in the number of job-seekers, hence the unemployment rate. In Bolzano the number of job-seekers fell and the unemployment rate edged down.
In 2010 bank lending to residents accelerated slightly in Trento and more sharply in Bolzano, where it had been flat in 2009. In both provinces the growth in outstanding loans between December 2009 and December 2010 was greater than the national average and in line with the average for the regions of the North-East. Credit growth mainly reflected trends in loan demand, which expanded slightly both in Trento and in Bolzano.
Finance to households, including credit supplied by financial companies, grew in Trento at about the same pace as in 2009 and more slowly in Bolzano. The growth was sustained by loans for house purchases, while consumer credit displayed a sharp inversion, contracting slightly in Trento and falling steeply in Bolzano.
Credit to firms picked up slightly in Trento and returned to growth in Bolzano. As in the regions of the North generally, the increase was driven by lending to manufacturers. The persistent cyclical difficulties and the banks' more prudent lending standards led to a further decrease in lending both to the construction industry and to the real-estate services sector. Credit to service firms stagnated.
Credit to households remained of high and rising quality in both provinces. The flow of new bad debts in lending to firms remained below the national average. In Trento, however, the impaired loan ratio was higher than average and rising with respect to 2009.
In 2010 households' accumulation of liquid financial instruments essentially came to a halt. As portfolios shifted towards higher-yield assets, the value of holdings of government securities, investment fund units and bonds other than Italian bank bonds increased.
