No. 16 - Economic developments in Campania Annual report

The world economic recovery continued to be uneven, geographically, in 2010. GDP growth was again slower in Italy than in the euro area as a whole.
The Campania region's GDP, after plunging by 5.2 per cent at constant prices in 2009, slipped by another 0.6 per cent last year, according to Svimez estimates, while Italian GDP grew by 1.3 per cent.
The mismatch between labour supply and demand worsened. The number of persons in work fell for the fourth year running, the employment rate for the population of working age dropped below 40 per cent for the first time, and scarcely one young person out of four was employed.
When non-working status does not coincide with education or training, there is a serious risk of rapid impoverishment of human capital. Persons aged 15-34 not in employment, education or training numbered 615,000 in Campania at the end of 2010; among young people, nearly 40 per cent were in this condition, the highest rate of any Italian region. More than in the rest of Italy, the weakening of the job picture affected entire households. In 2010, more than 27 per cent of all the region's households had not a single member employed, 3 percentage points higher than in 2008.
Business confidence among industrial firms improved in 2010, but less than the national average, and it deteriorated again in the first quarter of 2011. The increase in industrial sales, according to the Bank of Italy's survey of regional firms with at least 20 workers, was marginal and was reported by barely half the sample firms. Investment shrank substantially for the third consecutive year.
The present weakness of industry in Campania stems in part from firms' lesser ability to respond to market difficulties. New strategies, above all innovation in products, processes and the organization of productive factors, are less common than in other regions. The number of patents obtained, too, is significantly below the already low national average. Campania has an ample network of public research institutions; stepped-up application of scientific knowledge in the form of technology that can be utilized by firms would help close the gap in innovation.
Campania's manufactures exports, at current prices, after plunging 16.1 per cent in 2009, recovered by 12.8 per cent, less than the nationwide average. As in the past, the export upswing involved only a limited subset of dynamic firms. The motor vehicle industry did not contribute, as it did in the country as a whole; in Campania the industry is engaged in the restructuring of the main production plants; aerospace exports, by contrast, expanded substantially.
Construction activity declined, in both the public works and private building sectors. The number of house sales steadied after four years of decline; prices fell, continuing the trend that began in the second half of 2009.
Retail trade was affected by the slow growth of consumption and tourist visits. Household spending was curbed by the reduction in disposable income due mainly to the worsening employment situation. Inflation, which has been higher in Campania than in Italy overall for five years, also played a role, as did the progressive raising of local tax rates.
The tourist sector, whose substantial endowment of environmental and cultural resources should make it a strong point of the regional economy, contributes only modestly to local growth. The sector's per capita value added was 40 per cent below the national average from 2000 to 2007, and the region's share of the world tourist market was under 0.2 per cent in 2009, less than a quarter
of those of Lombardy and Lazio.
The impact of the recession on goods shipping eased last year. The potential contribution of the transport sector to the regional economy remains high. The sector has benefited in the course of the last decade from public and private investment that has improved the infrastructural endowment. In some provinces the indicators of road interlinkage with outlet markets in Italy - a gauge of the speed of goods shipment to their markets - are near the Italian average. The reinforcement of intermodal structures, notably around Nola, is increasing the competitiveness of the region in the logistics sector.
Bank lending to the productive economy accelerated in 2010, driven by firms' increased financing requirements. The growth in lending was concentrated among the less risky firms. In the latter part of the year credit demand weakened, however, and there was some renewed tightening of banks' lending conditions.
Default risk increased in 2010. The bad debt ratio rose from 3.5 to 5.2 per cent, about twice the national average. Between 2007 and 2010 the number of firms with repayment difficulties rose from 19.0 to 24.4 per cent of all those covered by the Central Credit Register reports. Banks' uncertainty over their borrower firms' solvency increased during the recession. One means of countering it in the last two years has been an increase in the portion of collateralized loans.
The spread between the cost of short-term credit to firms in Campania and the national average, holding the sector and size structure of the economy constant, remained about the same in 2010 as in the two previous years at around 1.2 percentage points. The gap depends among other things on longer time to recovery of bad debts.
For households there was an acceleration in house purchase loans, partly offset by a reduction, after years of expansion, in consumer credit granted by banks and financial companies. Repayment difficulties and defaults remained at the same levels as in 2009.
The APRC on home mortgage loans turned back upwards in the first quarter of 2011. At the end of 2010 the portion of fixed-rate mortgages in Campania was 45 per cent, some 14 percentage points above the nationwide figure.
In the three years 2007-09 the spending of local general government bodies in Campania increased by an annual average of 5.1 per cent, net of interest expenditure. This was more than twice as fast as in the ordinary statute regions as a group. Primary current expenditure also rose faster than in the other regions, owing in part to a sharper rise in sub-regional government staff costs.
Provisional data for 2010 suggest that some of the main expenditure items, including health care, have stabilized. In 2010 and 2011 the regional government adopted spending curbs after the violation of the Domestic Stability Pact in 2009. At the end of 2010 the debt of local government bodies in Campania (€12.8 billion) was reduced by 2.7 per cent after five years of expansion. As a ratio to regional GDP the debt in Campania is still the highest in Italy.