After having been severely affected by the international recession of the previous two years, in 2010 the economy of the Veneto region benefited from the strong recovery in world trade that had begun in the second half of 2009 and continued, at a slower pace, throughout 2010. The recovery from the recession is proceeding at a modest pace, in line with the pre-slump growth rate. At the end of last year, the regional economy was still well below the pre-crisis levels of activity, idle capacity was large, and employment growth was halting.
Given the feeble domestic demand and, especially, consumption, exports provided the main contribution to the growth of industrial output, particularly in the sectors producing investment and intermediate goods, which had most heavily been affected by the recession. The recovery in world trade was more pronounced in the emerging countries of Asia, and this was one of the reasons why the expansion of output and the growth of export sales were faster among the largest manufacturers in Veneto, who had already established a permanent presence in non-EU markets.
Industrial investments, which fell significantly in 2008-09, started growing again last year, as a consequence of the cyclical upturn and of the need to improve product quality. The growth involved machinery and equipment; investment in new buildings shrank.
Household spending remained cautious, held back by the state of the labour market and the dynamics of disposable income. Retail sales' growth was modest. The slackness of national consumption also affected the activity of the tourism industry, which remained at the same level as 2009, despite a slight pick-up in the number of overnight stays by foreigners. Investments in constructions fell further, both in their residential component, which suffered from the persistent weakness of the real-estate market, and in the non-residential one, affected by the fall in public and especially municipal investment.
The slowness of the recovery in output, together with the large number of workers who are still receiving wage supplementation benefits, impeded the expansion of employment, which remained unchanged in 2010, after the reduction suffered in the previous year. The share of young people not in education, employment or training increased significantly. Payroll employment fell further, with the exception of fixed-term contracts.
With the cyclical upturn, bank lending started growing again. Firms' demand for loans was fuelled by the need of financing the production recovery and of rescheduling the debt for firms under financial pressure. The sluggishness of households' real-estate investment curbed the growth of house mortgages.
In the final part of last year, banks slightly tightened their lending conditions to firms, given the persistent riskiness and the difficulty in increasing funding. Credit risk remained high. Impaired assets (bad debts and non-performing loans) diminished only marginally, while restructured debt increased substantially. The lengthy recession has affected the households' ability to save; deposits and bank bonds decreased slightly.
The number of bank branches fell slightly for the second year in a row, as a consequence of the process of network reorganization and rationalization undertaken by the banking sector.
