The Emilia-Romagna economy continued to grow in 2010, although at a modest pace. According to Prometeia estimates, regional GDP expanded by 1.4 per cent, in line with the national average, recouping only a small part of the overall decline recorded in the two previous years (7.3 per cent on the basis of Istat data). The recovery was fueled by exports, which benefited from the improvement in the world economy and the depreciation of the euro. However, compared with developments in world trade, the region's exports fell further during the crisis and then recovered less rapidly. Excluding the cyclical component, the gap between the long-term growth trend of the region's exports and that of world demand widened further.
The performance of firms has been differentiated in relation to their dependence on export demand, which, in turn, mainly relied on size and sector. In industry orders recovered after the large fall recorded in 2009. The growth was more pronounced for medium-large sized firms, which are more export oriented: exporting firms achieved increases in sales about twice those of firms oriented more towards the domestic market. The growth was accompanied by a small increase in capital spending after the contraction of the two previous years.
In the construction sector the level of economic activity continued to decline in 2010, although at a slower pace than in the previous year. This result reflected the decrease in both private- and public-sector demand. The cyclical upturn in services was less marked than that in industry. The weakness of domestic demand was reflected in a further decline in retail sales, especially among small and medium-sized outlets, and basically stagnant spending on durable goods. Tourism saw a contraction in the domestic component as opposed to an expansion in the foreign component.
Employment fell, most notably for construction workers, the self-employed and the young. In the two years 2009-10 there was a further worsening of the job prospects of the young, whose contribution to the expansion of overall employment remained negative. The unemployment rate rose, especially for the 15-34 age group. Recourse to wage supplementation increased but its rate of growth slackened over the year; in the early months of 2011 there was a contraction. Compared with 2009, the probability of finding a job rose. The number of households without any work-related income remained unchanged; families continued to provide support for members who remained without a job.
Following a fall at the end of 2009, bank loans began to grow again. Corporate lending was mainly fueled by the need for circulating capital deriving from the modest recovery in firms' sales and the restructuring of their debts. The component of the demand for loans associated with capital spending remained weak. Credit standards applied on new loans did not change significantly compared with 2009, except for the riskiest firms and the construction sector, for which they became tighter. The disbursement of loans continued, moreover, to be accompanied by a request for more guarantees than before the crisis. Partly as a consequence of these policies, loans to the riskiest firms contracted further, while those to the least risky firms began to expand again.
Lending to households continued to grow, driven above all by the demand for mortgage loans, which benefited from interest rates remaining at a low level. Consumer credit was affected by the low level of spending, especially on motor vehicles. Credit standards on loans to households did not change significantly either. In 2010 the riskiness of loans increased further, rising to historically high values, especially for corporate lending. Households' financial wealth in the form of securities and bank deposits decreased.
The largest banks increased their shares of the markets for loans, especially those to firms, and deposits. The numbers of banks and branches in operation decreased, partly as a result of some mergers and acquisitions.
The outlook for the pace of the recovery of the Emilia-Romagna economy remains uncertain. As regards industry, the business opinion surveys conducted by the Bank of Italy point to further growth in sales but a fall in capital spending. The slowdown in world trade could weaken the recovery in exports. As regards domestic demand, consumption is likely to continue to be negatively affected by the uncertainty about the outlook for the labour market. The outlook for the economy described above, the performance of the indicators of credit quality and the banks' assessments of the first part of the year all suggest that 2011 will see modest growth in the demand for loans, while the conditions on which it is supplied are unlikely to become significantly easier.
