The economy of Sardinia continued to grow in 2007: Svimez estimates put the increase in GDP at 1.3 per cent, slightly below the national average. The expansion came mainly in the first part of the year; activity slackened in the subsequent months, consistently with the deterioration at national level. The cyclical weakness persisted in the early part of 2008.
The results in agriculture were negative as a whole, reflecting a decline in production of the main crops. The performance of the livestock sector improved slightly.
The mild expansion that began in 2006 continued in industry. Production increased at a moderate average annual rate, supported by both domestic demand and exports. Turnover and investment grew and firms' continued to show profits. However, conditions in industry deteriorated gradually as the year wore on, and the fourth quarter saw a fall in production and in the capacity utilization rate.
Sardinian industrial firms are small, indeed smaller than the national average. In recent years their ability to grow has proven limited, especially in the case of the smallest firms. Their size characteristics adversely affect the result of the regional industrial system.
Sardinia's foreign trade grew, albeit at a lower rate than in 2006. The exports of the oil, chemical and metal products industries slowed while those of the traditional sectors accelerated, except for cork products. Imports of raw materials for the region's energy industry decelerated.
Activity remained weak in the construction sector. Continued growth in residential building, reflecting generally favourable demand conditions, contrasted with contraction in non-residential building and public works.
In the past few years local authorities have made growing use of public-private partnerships and project financing, through which private companies are involved in the construction and subsequent operation of facilities. Through these instruments have been realized especially infrastructures for collective services.
Activity slowed in the service sector. Households' demand for consumer goods registered limited growth; the effects of the weakness of demand were felt by small distributors in particular. Activity in tourist services continued to grow, boosted by visitors from abroad; passenger traffic on international air routes rose further. The greater availability of connections and accessibility of destinations helped to bring new tourists to the region, but it also involved a shortening of the average stay.
Public spending to support the regional economy rose in 2007 as a result of the larger payments connected with the conclusion of the Regional Operational Programme (POR) for 2000-06. During the year a new planning cycle (2007-13) was initiated for the expenditure of Community funds. In the new framework Sardinia is no longer considered a backward region and the amount of resources assigned to it has diminished.
Employment rose and the unemployment rate fell further in 2007 as a whole. However, during the year the gain in employment grew progressively feebler. The labour force contracted slightly, in part owing to the increase in the proportion of the population above retirement age. In recent years the population of Sardinia has aged even more rapidly than the national population. This trend, stemming in part from the low birth rate, could have a significant impact on labour supply in the future.
The growth in bank lending to the regional economy was slightly lower than in 2006. Lending to firms slowed, especially as regards service firms. The continued expansion in lending to households was sustained by demand for mortgage loans.
Available indicators do not signal a deterioration in loan quality. The ratio of new bad debts to the stock of performing loans at the start of the year fell, particularly as regards manufacturing and construction firms. The riskiness of loans to households remained unchanged.
Sardinian households have stepped up their borrowing considerably in recent years, in line with the trend at national level. Between 1998 and 2007 the ratio of loans to disposable income nearly doubled. The growth of the housing market, the greater supply of financial services and the change in consumption models contributed to this. Over the period as a whole, the rise in debt was not associated with an increase in loan defaults.
Bank fund-raising from customers resident in Sardinia decelerated, reflecting low growth in households' current accounts. The less rapid accumulation of savings also extended to securities entrusted to banks for custody and administration.
The structure of the financial system in Sardinia developed further: the number intermediaries and of bank branches increased. Among non-bank intermediaries, the role of collective loan guarantee consortia expanded.
