In 2010 world economic activity returned to a robust growth of about 5 per cent. In the emerging countries output expanded at a faster pace. In Italy GDP rose less than in the rest of the world or the euro area. Preliminary estimates by Svimez suggest that in Puglia, as in the rest of the South, the economy was sluggish. There were a few signs of improvement, but the strength of the recovery is uncertain and employment remains much below pre-crisis levels.
Economic activity and the labour market. - Regional economic activity recovered in 2010, boosted by export. According to the Bank of Italy's survey of manufacturing firms with at least 20 workers, sales rose by 4 per cent in nominal terms. The rise was stronger in some sectors such as food processing, textiles, furniture. The region's industrial districts, burdened by poor international projection and small firm size, continued to stagnate.
Firms' profits improved, but low capacity utilization and the uncertainty surrounding economic activity further dampened investments.
Exports of goods rose by a fifth in nominal terms, but Puglia continued to perform poorly as regards sales towards the most dynamic emerging countries. A relatively small portion of regional exports goes to the southern Mediterranean countries involved in recent political upheaval.
Uncertainty bearing on internal demand affected the construction industry, whose production was flat after two years of contraction. Construction activity staged some modest improvement only among the largest firms, sustained by public works. Residential building continued to shrink, and the number of property sales fell.
Small and medium-sized stores retail sales further declined, as well as those at non-food retailers. Department store sales increased; the average size of retail outlets has increased rapidly during the last five years.
The regional tourism industry again performed positively, driven by foreign travelers. The number of visitors rose by 4 per cent overall, the number of foreign tourists by 10 per cent. Since the turn of the century the growth in tourist overnight stays has been faster than the national average. Tourist accommodation facilities have expanded accordingly to the demand increase.
The weak economic activity negatively affects the level of employment. The conditions of the labour market in Puglia are similar to those of the other southern regions and worse than in the rest of Italy. Employed people fell by 15,000 last year, bringing the total job loss since the onset of the crisis to 64,000. There was a reduction in ordinary wage supplementation hours (Cassa integrazione guadagni, or CIG), but this was more than offset by a sharp rise in extraordinary and under-waivers benefits, reflecting the persistence of some company crises and the spreading of troubles to sectors not covered by the ordinary programme. The unemployment rate rose to 13.5 per cent, and one out of five families did not have any working-age member employed. Again in 2010 the economic situation had weaker effects on women's employment, more severe effects on young people. The portion of young people not in education, employment or training (NEET) increased to about a third.
The credit market. - Last year the growth of bank lending to Puglia residents was driven by strong demand. Lending policies continued to be prudent, owing in part to uncertainty over the prospects for the economy and to rising funding costs. Bank lending to firms especially increased at medium and long term. The credit demand was sustained by debt restructuring, whereas the demand for investments remained low. In the second half of the year lending to small enterprises also returned to growth, after a contraction dating back to mid-2009; there also was an increase in the credit granted to firms by the top five Italian banking groups, whose lending had contracted more sharply during the toughest phase of the crisis.
The short-term bank interest rates charged to firms remained at historically low levels. The spread vis-à-vis the Centre and North of the country, which mirrors the higher risk of resident customers, remained broadly stable. Banks improved the fine-tuning of their lending terms to borrower risk, pursuing a tendency which showed up after the onset of the crisis.
The ratio of the flow of new bad debts to total loans slowed down for regional firms, and was in line with the national average. There was nevertheless an increase in impaired assets (positions in temporary difficulty), which portends a possible worsening of repayment performance in the months to come. Credit quality especially deteriorated in the industrial districts.
Bank lending to households expanded, fueled by home mortgage demand. Although the real estate market undergoes a phase of stagnation, demand for loans benefited from the low level of interest rates. The share of new mortgages at variable rates increased, while there was a further expansion in the use of hedges against interest rate increases. The quality of the credit extended to households in Puglia remained high.
Local finance. - From 2007 to 2009 the expenditure of local authorities in Puglia increased more than the average in the other ordinary statute regions. Last year the Regione Puglia agreed to a financial adjustment plan in order to correct the health care budget. Per capita spending is still lower than the average for the ordinary statute regions, owing principally to the lower staff costs of the sub-regional government bodies.
