In 2006 economic activity continued to expand in Sardinia, maintaining the previous year's trend. According to estimates prepared by Svimez, Association for Economic Development in Southern Italy, GDP increased by 1.8 per cent at constant prices, slightly less than reported by ISTAT for 2005. The regional economy benefited from favourable national and international economic conditions.
In agriculture the previous year's poor results were repeated, with a decline in livestock production and in output of the main crops.
In industry, on the other hand, the performance was generally positive. Output expanded on average for the year in conjunction with the upturn in demand. The increase in production, which mainly concerned large firms, was concentrated in the second half of the year. Firms' stepped up their investments.
The expansion under way in the construction industry in recent years came to a halt. Output of public works and non-residential building diminished, while the construction of new dwellings continued to increase, albeit more slowly than in 2005.
There was a modest rise in consumer spending, which affected in particular retail sales by large outlets. In services other than trade conditions were generally favourable. In the tourism industry, there was a considerable rise in the number of visitors registered in accommodations in the region.
Foreign trade continued to expand. The growth in exports was due mainly to the increase in sales by the oil, chemical and metal industries. Imports rose as a result of heavier spending on hydrocarbon supplies for regional industry.
The performance of the labour market was generally positive. Employment growth accelerated compared with 2005 and the unemployment rate continued to decline. There was a further contraction in the labour force and a drop in the participation rate.
Bank lending to the regional economy increased at a rapid pace, continuing the previous year's expansion. The trend was most apparent among service companies and manufacturing firms; lending to households slowed owing to the downturn in mortgage demand for home purchase. The rate of interest on short-term loans was reduced from the previous year, and the gap with the national average narrowed. The available indicators confirm that the quality of credit deteriorated during the year. The ratio of new bad debts to outstanding loans at the beginning of the year increased, particularly in the case of lending to firms.
Bank fund-raising among customers resident in Sardinia accelerated, continuing the trend under way in 2005. Bond issues picked up after declining for several years, and current accounts continued to increase. The face value of households' holdings of non-financial companies' shares and bonds began to pick up.
