Owing to the international financial crisis and the subsequent global recession, Italian GDP declined by 5 per cent in 2009. According to available estimates, the contraction in Veneto was similar to national one. Activity has been reviving slowly since last summer, but it is still well below the pre-crisis levels and growth outlooks remain weak.
Manufacturing firms, which in Veneto are strongly integrated into world trade, slashed production and hours worked in 2009. Large-scale recourse to the Wage Supplementation Fund made it possible to limit the fall in employment. Ample spare capacity led to a sharp decline in investment, and firms expect this factor to hinder a rebound in investment this year. In the opinion of firms, the upswing in sales will be moderate in 2010. Manufacturing firms are making initial attempts to reposition themselves in foreign markets, in order to intercept the demand coming from the emerging countries of Asia and South America, particularly through new technical and production cooperation agreements with foreign companies.
Activity also fell significantly in the construction sector, owing to the worsening economic situation of households and firms. The volume of transactions on the real estate market declined considerably, while house prices came down only slightly. The value of new public works decreased, with projects receiving only limited financing. A special section of the Report on Veneto assesses the region's endowment of transport infrastructure, finding that the levels of congestion are high, although in this decade there has been a slight improvement in connection with the progress of strategic infrastructure projects covered by the public works enabling law.
The impact of the recession on the service sector was less severe. Activity fell more markedly in transport and logistics, because of their close connection with manufacturing industry. Retail trade sector was affected by the slump in domestic demand that reflected the worsening of labor market conditions. Tourism recorded a more moderate fall, partly due to the reduction in visitors' average daily expenditure.
The effects of the recession on employment became evident in the second half of the year, with a reduction in the number of employees and an increase in unemployment, particularly among industrial and construction workers, men and the younger age-groups. Expiring fixed-term employment contracts were rarely renewed. Up to now, massive recourse to wage supplementation has limited the rise in the unemployment rate, but the recent increase in extraordinary wage supplementation, connected with company crises, could prefigure a further drop in employment.
Firms' economic and financial situation worsened, especially in the industrial sector. Self-financing declined as turnover and profitability diminished. The lengthening of the collection time for trade receivables contributed to the deterioration in firms' liquidity position. Their demand for credit faded; in the final part of the year it was directed almost exclusively towards short-term financing in order to cope with liquidity strains.
In addition to weakening the demand for credit, the financial crisis and the recession made banks more selective in their lending. The rapid increase in the riskiness of borrowers prompted banks to widen the spread on interest rates to firms, most notably high-risk ones, while the reduction in the quantities of credit supplied, recorded at the height of the crisis, eased significantly. Bank loans to firms fell, particularly those granted by the largest banks. Lending to households increased slightly: new loans for house purchases, which contracted during the most acute phase of the crisis, subsequently returned to grow, stimulated by the reduction in the cost of credit. In the second half of the year the restrictiveness of credit supply lessened, and banks expect to ease lending standards further in the first half of this year.
A special section of the Report is dedicated to the collective loan guarantee consortiums promoted by entrepreneurs associations. The guarantees granted by these consortiums, which grew significantly in the last two years in part thanks to public measures for their capital strengthening, enabled small firms to limit the cost of their bank loans.
