The world economy began to slow from the middle of 2011. Euro-area GDP contracted in the fourth quarter; over the year, it grew by an average of 1.5 per cent. Italy underperformed the euro area, with GDP growth of 0.4 per cent. Estimates for Campania indicate that regional GDP was unchanged.
Campania's GDP has fallen in five of the last nine years; in the remaining four it has increased at rates of 1 per cent or less. The alternation of phases of feeble growth with phases of sometimes deep recession has severely weakened households' economic situation, young people's job prospects and business confidence.
In a regional economy with major problems of competitiveness, a not insubstantial minority of firms nevertheless displayed an ability to react, regaining and in some cases exceeding the levels of activity they had reached before the onset of the economic and financial crisis. The search for new products or new markets proved to be an effective strategy to counter the decline in sales. In industry, for example, the firms that invested in innovation and internationalization during the first years of the crisis reported significantly higher-than-average growth in turnover in both 2010 and 2011.
In recent years the collapse of exports in some sectors, particularly the automotive industry, has been offset by the expansion in exports of others (agricultural and food products, pharmaceuticals and aerospace), another sign of the existence of viable industrial potential. However, firms with little openness to foreign trade remain the rule in the Campania region's manufacturing sector. The contribution of foreign demand to GDP, a decisive variable for the prospects of regional economic growth, is very low in Campania and well below the average for the other underdeveloped regions of Europe.
According to the Bank of Italy survey of a sample of industrial firms with 20 or more workers, there was a slight increase in turnover and a further fall in investment in 2011. The forecasts for 2012 are negative.
The prolonged weakness of domestic demand led to further declines in activity in construction and distribution last year.
Household consumption was flat and significantly below its 2007 level. Coupled with the weakness of disposable income, this reflects the severe impact of the crisis on the labour market. The poverty rate among households in the region has risen since 2007.
Employment has been falling almost without a break for eight years. In 2011 the decline was again concentrated among the younger age groups, which recorded an increase in the percentage of those not in employment, education or training. The under-utilization of human capital is less widespread among university graduates in scientific fields. An improvement in the quality of education, which remains lower than the national standard, could enhance young persons' chances of employment.
The net wealth of households in the region has grown more slowly in recent years, but its ratio to disposable income is comparable to the national average, which in turn is high by international standards. At the end of 2011 some components of households' savings, including bank deposits, were down slightly compared with a year earlier.
Banks' funding difficulties and, in particular, the worse conditions of access to wholesale funding markets in the fourth quarter of 2011, led to a tightening of lending standards in Campania, as in the other regions.
Bank lending to non-financial firms, which had been growing at an annual rate of about 4 per cent up to the autumn, slowed abruptly thereafter. Its twelve-month rate of growth turned negative in February 2012 and stood at -1.7 per cent in March.
The short-term financing needs of firms increased, partly owing to the difficulty of collecting accounts payable, notably from general government. Nevertheless, the overall demand for credit remained weak because of the low level of investment.
The decline in lending also reflected more stringent screening of customers by banks. The effects of this were greater for small firms and for businesses characterized by economic and financial fragility. The concentration of credit supply towards less risky customer segments helped to slow the growth in defaults, whose rate nonetheless is still higher than that in the other regions.
Lending to households slowed, owing both to banks' caution and to sluggish demand for house purchase loans. According to the responses by the participants in the Bank of Italy's survey on bank lending, the tightening of lending standards could become less severe in the course of 2012. For small businesses, conditions of access to credit could benefit from a reorganization of the regional system of mutual loan-guarantee consortiums that would make its structure similar to those in the rest of Italy.
Local government bodies in Campania have undertaken policies to curb expenditure growth and reduce the debt accumulated in years past. The incidence of taxation remains higher than the national average.
Accelerated use of the EU structural funds, planned for this year, could counter the decline in public investment. More than the quantity of resources used, it is the quality of expenditure and its concentration in projects of strategic importance that can foster competitiveness gains for the region's economy.
