In 2008 the Sardinian economy was affected by the cyclical downturn at national level and the attendant worsening of the global financial crisis. According to Svimez estimates, Sardinia's GDP fell by 1 per cent, comparable to the national contraction. The deterioration came mainly in the final part of the year, with a slump in demand in basic industries and construction and a worsening in labour market conditions.
Industrial production fell significantly, due to a weaker domestic demand and a contraction of export orders. Firms' profitability deteriorated. The pronounced uncertainty about the outlook for recovery curbed investment by comparison with the previous year. The slowdown was most evident in the chemical and metalworking industries, which are more exposed to fluctuations in world demand.
The region's foreign trade grew thanks to the oil refining; net of refined petroleum products, exports declined, most markedly for the machinery and equipment, chemical and metals industries. The exports of traditional industrial products diminished, with the exception of cork products.
Construction activity continued to weaken. Stagnation in the pubic works sector was accompanied by a reduction in residential building owing to the drop in real-estate transactions. House prices in Sardinia continued to rise, but more slowly than in the preceding years.
Activity in the service sector slowed for the second successive year. Contributory factors were the fall in household demand, especially for durable goods, and the weaker growth in tourism and maritime and air transport.
Public intervention continued to support the regional economy through flows of resources connected with the conclusion of the 2000-06 Regional Operational Programme and the instruments of negotiated planning. In May 2009, with the approval of the regional finance law, additional expenditure programmes were introduced to counter the cyclical downswing.
After a long expansion, employment in Sardinia fell slightly as a result of the contraction recorded in the second half of the year. The average annual unemployment rate rose considerably. The labour force grew thanks to the expansion of the female component.
The rate of growth in bank lending fell in 2008, although it remained higher than the national average; according to provisional data, lending continued to slow down in the first quarter of 2009.
Lending to households was affected by the weakening of the real-estate market. The flows of medium and long-term loans for house purchases declined, ending a prolonged expansion, and there was also a sharp deceleration in consumer credit disbursed by banks and financial companies.
The slowdown in lending to firms mainly involved construction companies and small enterprises. Lending to larger companies continued to grow at a lively pace in 2008; it slackened markedly in the first quarter of 2009.
The interest rates applied by banks to regional borrowers rose overall for the year; the increase involved firms in particular. In the first quarter of 2009 bank lending rates to residents came down in parallel with the reduction in official rates.
The spread between the cost of short-term loans for Sardinian firms and the Italian average widened in 2008 to stand at slightly higher than 1.5 percentage points at the end of the year. The difference is partly explained by the composition of Sardinia's productive sector by firm size and sector, with its higher proportion of small firms compared with the Italian average. The higher-than-average bad debt ratio is also a factor.
Loan quality deteriorated in the region. The ratio of new bad debts to outstanding loans rose in 2008. The increase was concentrated in the final part of the year and mainly concerned loans to firms.
Bank deposits held by customers resident in Sardinia grew faster than in 2007: the expansion involved households' current accounts in particular; Sardinian firms' liquid balances with the banking system remained virtually unchanged. Current account deposit rates rose slightly.
The number of banks present in Sardinia declined in 2008 as a consequence of the consolidation of the leading national groups. Banks continued to expand the branch networks serving the region in 2008. Sardinian households and firms have stepped up their use of electronic banking services in recent years, but the regional incidence of these instruments is still lower than the Italian average.
