Tensions arose in the financial markets in the second half of 2011 in connection with worries about the sustainability of the public finances of several euro-area countries. The tensions affected the prices of Italian government securities, making it necessary to adopt repeated budget adjustment measures. These were accompanied by a general worsening of the economic climate, a slowing of economic activity when it had not yet regained its pre-crisis levels, and the downward revision of macroeconomic forecasts. Firms' uncertainty about the trend of market conditions increased.
Economic activity in Calabria stagnated in 2011 after recovering somewhat the previous year. According to Prometeia estimates, Calabria's GDP grew in real terms by 0.2 per cent, less than the national average.
Our surveys of industrial firms with 20 or more workers found that 53 per cent of firms headquartered in Calabria registered a drop in turnover and 45 per cent a gain. For 2012, the balance between firms expecting turnover growth and those expecting contraction looks set to worsen.
The persistence of ample spare capacity and the signs of a further slackening in demand, accompanied by the mounting strains in financing conditions from the second half of the year onwards, impeded business investment: in 2011 the balance between the percentage of firms indicating an increase in investment and those indicating a decline turned negative, and firms expect investment to diminish again in 2012.
Calabria's exports of goods slowed, again underperforming both the average for the Southern regions and the national average, owing to a sharp drop in sales to the European Union and particularly to the countries undergoing a debt crisis (Spain, Greece and Portugal). Exports of food and agricultural products, chemical products and machinery, which together account for more than 70 per cent of the region's goods exports, registered a decline.
The construction sector suffered from the economic downturn. According to our survey of construction firms, production and employment fell. In the residential building market, the number of transactions diminished for the fifth consecutive year.
The value added in services rose slightly, but more slowly than in 2010, according to Prometeia estimates. For non-financial private services, the Bank of Italy survey of a sample of firms with 20 or more workers found that 55 per cent of firms registered a decline in turnover while only a fifth reported an increase. The performance of retail and wholesale trade reflected the fall in real disposable income and household consumption; new car registrations decreased and sales of other durable goods fell.
After four consecutive years of contraction, employment in Calabria rose slightly in 2011 as a consequence of gains in services and agriculture, which offset the further decline in employment in industry and construction. In particular, among persons in work, the share of women, self-employed persons and workers on fixed-term contracts increased. The number of hours of wage supplementation authorized rose sharply, though less than in 2010, with a far more negative trend than in the South of Italy overall.
In 2011 the rate of growth in bank lending to customers resident in Calabria came down and was similar to the national average. According to provisional data, bank lending contracted slightly in the opening months of 2012 compared with the year-earlier period.
Bank lending to consumer households slowed in 2011: a lower rate of growth in loans for house purchases was accompanied by a contraction in consumer credit in the second half of the year. In December 2011 the average interest rate on loans for house purchases was 1.1 percentage points higher than a year earlier. The crisis was reflected in a drop in households' demand for property loans; in the last few years there has been a shift back towards variable-rate mortgages.
Business loans diminished for both small enterprises and, more markedly, bigger firms. This reflected both a fall in firms' demand for credit and a more cautious supply policy on the part of banks. Short-term interest rates applied to firms based in Calabria rose, notably in the last quarter. Our estimates indicate that while the drop in credit involved all firms, it was sharper for the financially more vulnerable ones.
After peaking at the end of 2010, the deterioration in loan quality stabilized at levels worse than the national average. The share of loans from banks and financial companies to firms in temporary repayment difficulty (substandard loans and restructured loans) rose somewhat, possibly foreshadowing a deterioration in some credit positions in the coming months.
The bank deposits of firms and consumer households expanded slightly in 2011 after stagnating in 2010.
