The performance of the region's economy, already negative in 2008, worsened further in the first half of 2009, reaching the cyclical low in the second quarter. Despite the subsequent timid recovery, signaled by businesses' assessments of orders, 2009 closed with all the main indicators down significantly.
According to Prometeia estimates, regional GDP fell by 4.5 per cent, slightly less than the national average, after declining by 1.7 per cent in 2008. In the surveys conducted by the Bank of Italy this March and April, among the firms reporting a fall in turnover (roughly three out of every four), only half thought their sales might return to pre-crisis levels by 2012. Together with the weakness of domestic demand, the contraction in exports, down by a quarter from the previous year, was a strongly negative factor.
The drop in demand induced firms to cut back production considerably by reducing labour input and capacity utilization. Ample margins of spare capacity, together with uncertainty about the timing of the recovery, contributed to the sharp fall in investment, which was reflected in slack demand for credit for purchases of buildings and equipment, set against a gradual deceleration of the credit tightening during the year, especially for financially sounder firms.
Despite massive recourse to ordinary as well as extraordinary wage supplementation, the unemployment rate rose from 4.8 to 6.7 per cent. Employment diminished by 2.6 per cent, a steeper fall than the Italian average. Moreover, in contrast with developments at national level, in Umbria the decline of about 10,000 in the total number of persons in employment was accompanied by an increase in the proportion of workers on fixed-term or part-time contracts, who now make up more than 25 per cent of the total.
The deterioration in the state of the labour market weighed on household confidence and spending capacity. Despite historically low interest rates, demand for loans for house purchases remained weak; most of those granted were variable-rate mortgages. This affected firms in the building sector, where the fall in production was particularly large.
The overall annual growth in lending slowed from 6.8 per cent to 1.2 per cent, with loans to households up by 4.0 per cent and those to firms down by 0.2 per cent. The ratio of new bad debts to outstanding loans rose from 1.5 per cent to 2.2 per cent and the stock of bad debts grew to 4.9 per cent of loans.
