No. 15 - Economic developments in MoliseAnnual report

The economy of Molise recorded a feeble recovery in 2010, with the pace of activity less hesitant in the second half of the year. According to the latest Prometeia estimates, after contracting by nearly 4 per cent in the two years 2008-09, regional GDP grew by 0.3 per cent, in line with the average for the South and Islands but significantly below that for the Centre and North.
The recovery did not spread to all branches of manufacturing. Metal and engineering products registered the greatest improvement. The structural crisis of the fashion sector in Molise appears to be abating. Sugar refining continued to encounter difficulties, but new ventures were launched in the food products industry.
Exports were flat overall, whereas at national level they grew by more than 15 per cent; excluding fashion products, however, Molise's exports would have increased by more than 12 per cent. Capital spending by industrial firms remains at historically modest levels, reflecting the low capacity utilization rate and the uncertain outlook for demand.
Construction activity remained sluggish, owing in part to the prolonged decline in public works. Activity in the service sector stagnated, although the Bank of Italy's survey of non-financial private service firms found an improvement in profitability. Overnight stays by visitors diminished and consumer spending remained weak.
Labour market conditions remain unfavourable. Employment fell further. Recourse to the Wage Supplementation Fund continued to increase in the first half of 2010 before turning downwards. The labour force participation rate consequently settled to low levels for the decade. Female participation is particularly low in Molise. The employment rate among women is more than 23 percentage points lower than for men. The difference is greatest for the population aged 35 to 54 but narrows to less than 6 percentage points for university graduates.
A comparison with the other Italian and European regions closest to Molise in terms of productive structure and social and economic conditions shows that the growth and competitiveness of Molise's economy are held back by the inadequate volume of resources invested in research and development and the limited use made of highly skilled personnel in the productive system. In the last two years Molise's insufficient openness to foreign trade compared with its peers and its lower degree of specialization in high-tech goods have been additional braking factors.
After two years of increasing weakness, bank lending returned to growth in 2010. The expansion reflected the acceleration in lending to consumer households and the recovery in loans to firms, which had declined in 2009.
Overall, lending to the productive sector remained close to the previous year's levels. Loans to manufacturing firms fell appreciably, mainly because of the troubles of the textile industry. By contrast, lending to service firms expanded.
Credit to consumer households grew by 7.3 per cent, gaining pace with respect to 2009. The growth was led by loans for house purchases, partly as a consequence of persistently very low interest rates.
The quality of credit improved, with a fall in the impairment rate for firms and households alike.
The commitments to curb the costs of healthcare continue to weigh on the regional government's budgetary policies. Starting with the 2010 tax year, recurring healthcare deficits led to an increase in the rates of the regional tax on productive activities and the regional personal income surtax to above the highest levels in force. This measure, envisaged by the procedure for high healthcare deficits, was taken for four regions, three of which in the South and Islands.