No. 18 - Economic developments in BasilicataAnnual report

Economic activity in Italy began to show signs of reviving in the summer of 2009, but the expansion, led by exports, remained weak throughout 2010. The forecasts for 2011 and 2012 are for a moderate increase in GDP, on the order of 1 per cent.
In 2010 the economy of Basilicata continued to contract. As estimated by Svimez, regional GDP declined by more than 1 per cent, after plummeting in 2009. According to the Unioncamere survey, industrial production fell sharply again. This was due in part to the termination of the incentives for the auto industry, which had shored up economic activity in 2009. The same factor also affected exports, two thirds of which consist of motor vehicles. In fact, Basilicata was the only Italian region to record a drop in exports in 2010. The poor export performance also reflected the small share of sales to the major emerging countries (Brazil, Russia, India and China).
In services, there was a decline in retail trade. Overnight stays by visitors to the region stagnated, despite a large gain for the city of Matera.
The practically universal contraction in economic activity hit employment. The number of persons in work fell by more than 5,400 in 2010, bringing the two-year decline to 10,600 (or 5.7 per cent). The drop was more pronounced than the national average and sharper than in the South and Islands as a whole.
Youth unemployment grew, and there was a corresponding increase in the percentage of young people not in education, employment or training, whose number rose by more than 6,000 in 2010, more sharply than the average for the South and Islands. The number of households with no member in work also grew. According to our estimates, in Basilicata the percentage of such households rose from 15.5 per cent in 2007 to 20.2 per cent last year, a larger increase than the average both for the South and Islands and for Italy as a whole. The estimated probability of an unemployed person finding work within one year has diminished significantly following the recession; it fell from nearly 30 per cent in 2007 to just above 20 per cent in 2010.
Bank lending accelerated in 2010. The overall growth in lending (3.3 per cent) came largely from loans to households, which increased by 6.9 per cent, against a more moderate expansion of 2.4 per cent in loans to firms. The growth in lending was more modest for firms with fewer than 20 employees. For manufacturing firms there was another contraction in credit, albeit less marked than in 2009. The growth in lending to construction firms slowed, while that in lending to service businesses accelerated slightly.
According to the survey conducted by the Bank of Italy's Potenza branch on a representative sample of directors of bank branches in Basilicata, the expansion in businesses' demand for loans is expected to slow in the first half of 2011, except in the service sector. By contrast, demand for loans for house purchases is held likely to accelerate in the first half of the year, while that for consumer credit is expected to slow down. Credit supply conditions are expected to continue to tighten, but less sharply.
Interest rates on short-term loans to firms, which had plunged by 2.8 percentage points in 2009, rose slightly in 2010. On the other hand, those on medium- and long-term loans came down by more than half a percentage point. The annual percentage rate of charge applied to households for loans for house purchases edged down, and the differential between fixed-rate and variable-rate mortgages narrowed to 1.6 percentage points, although it remained much wider than before the crisis.
The ratio of adjusted new bad debts to the stock of loans outstanding at the beginning of the period was equal to 2.0 per cent in 2010, down a little from the previous year. The slight improvement in credit quality regarded both households and firms, but for the latter the indicator is still well above the pre-recession levels.