Despite the buoyant growth of the world economy, Italian GDP grew by a modest 1.2 percent in 2004, up from 0.3 per cent in 2003, and there was a renewed gap with respect to the other euro-area countries.
Growth was fastest in the Centre (2.6 per cent). Elsewhere, the pace ranged from 0.6 percent in the South and Islands to 0.8 per cent in the North-East and 1.1 per cent in the North-West. Employment as measured by standard labuor units expanded by 0.8 per cent nationwide (0.4 percent in 2003). For the second consecutive year it contracted in the South and Islands, discouraging people from undertaking job searches.
The service and agricultural sectors contributed 0.8 and 0.3 percentage points respectively to the growth in value added. Industry contributed a bare 0.2 points, mainly from construction. The expansion of services was concentrated in health and other public social and personal services. It was sharper in the Centre than in the other parts of the country. There was a strong increase in agricultural value added, especially in the Centre (20 per cent). In the North-East and in the South and Islands growth exceeded 10 per cent. In the North-West it was 5 percent.
In industry excluding construction value added increased by 0.3 percent, most of which as due to growth in the energy segment. In manufacturing, it stagnated. In construction there was a gain of 2.7 percent. For industry overall, value added rose by 2.3 per cent in the North-West thanks to strong growth in construction and energy and the positive trend in metal products, while production of transport equipment contracted. The North-East, where value added declined by 0.5 per cent, was more greatly affected by the difficulties of traditional manufacturing industry and also suffered weaker construction growth than that recorded nationwide. In the Centre, where value added rose by 1.6 per cent, growth in construction and energy was partly offset by a slowdown in activity in traditional manufacturing industries, notably the fashion sector. In the South and Islands there was a fall of 1.5 per cent, as the growth in building activity was not enough to compensate for the decline in industry excluding construction. The southern regions, where exports account for a smaller share of output, benefited less from the recovery in foreign demand.
Final consumption expanded by 0.5 per cent in the South and Islands in real terms and by 1.3 percent in the rest of the country.
According to estimates by Svimez, the Association for Industrial Development in Southern Italy, gross fixed capital formation returned to growth of nearly 2 per cent in both parts of the country. GDP per inhabitant in the South and Islands was 60 per cent of that in the Centre and North, compared with 56 per cent in 1995. The narrowing of the gap has been affected by migration from South to North. Between 1995 and 2000 the number of southern residents moving north rose from 100,000 to 150,000 a year before falling to 130,000 in 2001 and 2002.
Even in a context of rapidly expanding world trade, Italian export growth was modest, scarcely half that of the euro area as a whole. At current prices export growth was greater in the South and Islands and the North-East than in the Centre and the North-West. In all parts of the country exports of metal and metal products made a substantial contribution to export growth, thanks to buoyant world demand for steel and the consequent rise in steel prices. The contribution was greatest in the South and Islands and the North-West, least in the Centre. In the South and Islands contributions also came from refined petroleum products, boosted by rising oil prices, and from transport equipment, thanks above all to multinational enterprises and shipbuilding. In the North-East exports were driven not only by shipbuilding but also by machinery and mechanical equipment. The exports of the North-West expanded by less than the national average in almost all sectors; they were curbed by the stagnation of foreign sales of transport equipment.
Exports of clothing and textiles and leather and leather products declined in most regions. Most heavily affected was the Centre, but that part of the country benefited from exports of machinery and mechanical equipment and of chemical products.
Between 1996 and 2004 the world market share of the North-West at current prices declined more than those of the North-East or the Centre. That of the South and Islands remained unchanged. Italy specializes in traditional manufactures (clothing and textiles, shoes and leather), which are subject to increasing competition from recently industrialized countries. In medium and high-tech industries (machinery and mechanical, electrical and optical equipment, transport equipment), which account for about a quarter of Italian manufacturing value added, productivity growth was less than in the other leading European countries or the United States. By comparison with the other industrial countries Italy exports a smaller amount of high-tech products, which have recorded the fastest growth in world export demand. Finally, Italian exports go mostly to the euro area, which has contributed comparatively little to the growth of world exports.
From 1996 to 2002 (the latest year for which sectorial and country breakdowns are available), the loss in the share of manufacturing exports to the main OECD countries was sharpest for the regions of the North-West, more limited for those of the North-East and the Centre; the share of the regions of the South and Islands rose slightly.
The poor performance of the North-West, which is comparatively specialized in medium and high-tech production, can be blamed on a loss of competitiveness significantly greater than the national average.
Between 1996 and 2002 value added in the production of mechanical, electrical and optical machinery and equipment and transport equipment remained practically unchanged (rising just 0.5 per cent, as against an Italian average of 9.1 per cent), and productivity growth was nil (while in Italy as a whole there was a small gain in those sectors). In the fashion industry too the North-West was outperformed by the rest of the country in value added and productivity.
