In 2011 the region's economy encountered mounting difficulties in overcoming the crisis that has troubled it for more than three years. According to Prometeia data, Sardinia's GDP was substantially flat (down by 0.2 per cent); the recovery that had begun in 2010 and continued into the first half of last year subsequently stalled. Factors in this were the slowdown in the national and international economy and the worsening of expectations together with the intensification of the sovereign debt crisis from the summer onwards.
Business activity, still well below the level recorded in 2007 before the financial crisis, fell back at the end of 2011. During the year there was an upsurge of corporate crises, traceable in part to persistent structural problems, and firms' already weak financial situation worsened. The overall trend reflected developments in the industrial sector, where demand slumped and production slowed abruptly in the last months of the year. In the construction sector, the property market remained weak and production declined.
According to the Bank of Italy's survey on industrial firms, turnover held up over the year as a whole, but production and investment decreased. Exports net of oil products showed a modest gain on average for the year, falling in the last two quarters. After the deep slump of 2008-09, the recovery in Sardinia's exports was extremely modest by comparison both with Italy and vis-à-vis the performance of other European regions with similar characteristics.
Activity slowed in the service sector, reflecting the recent weakening of households' spending capacity and the deteriorating outlook during the year; firms operating in tourism registered a further decline in demand.
Employment rose slightly on average for the year; it fell in industry and construction while increased in services. The number of young employees continued to decline; a significant percentage of persons under age 35 was not in employment, education or training.
Bank lending to residents in the region stagnated at the end of the year, reflecting the weakness of demand from the non-financial sector and more severe screening by banks.
Loans to firms based in Sardinia contracted, in contrast with the moderate increase at national level; lending to service businesses and especially to construction firms declined, while lending to manufacturing firms showed a modest increase. The growth rate of loans to less risky firms remained positive. Interest rates to the productive sector rose significantly, in part in relation with the increasing pressure on European sovereign debt.
Lending to households expanded, but at a slower pace than in 2010. This path reflects the deceleration in consumer credit and the fall in demand for home mortgages, due in part to the increase in the cost of financing.
Credit quality worsened overall. After the positive trend in 2010, the ratio of the flow of new bad debts to outstanding loans to firms rose sharply, and leading indicators suggest that there may be further difficulties ahead. The impairment rate of lending to households held steadily below the national average.
Bank fundraising experimented a further fall, mainly involving current accounts. The concentration of the regional credit market, though still higher than the Italian average, diminished with respect to 2010. The use of electronic means of access to banking services continued to grow.
In the three years 2008-10, the non-interest expenditure of local government bodies in Sardinia increased by an average of 1.8 per cent per year, compared with a slight decrease for the special-statute regions overall. The increase was concentrated in current expenditure; investment spending diminished.
In the same three years, the tax revenues of local authorities in Sardinia, including the share of taxes devolved from the central government, grew by an average of 7.3 per cent per year. The tax revenues of the regional government increased while those of the provinces and municipalities decreased.
After diminishing in 2010, local government debt in Sardinia fell further, to 2.3 billion Euros.
