Italy.

139 Pages·1989·7.629 MB·English

by  OECD

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ECONOMIC SURVEYS
ITALY
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ORGANISATION FORECONOMIC CO-OPERATION ANDDEVELOPMENT
Pursuant toarticle 1 oftheConventionsigned in Parison 14th December
1960,andwhichcameintoforceon30thSeptember 1961,theOrganisationfor
Economic Co-operation and Development (OECD) shall promote policies
designed:
- toachievethehighestsustainableeconomicgrowthandemploymentand
a rising standard of living in Member countries, while maintaining
financialstability,andthustocontributetothedevelopmentoftheworld
economy:
- to contribute to sound economic expansion in Member as well as
non-membercountries in the process ofeconomic development; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obligations.
The original Member countries of the OECD arc Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently through
accession at thedates indicated hereafter:Japan (28thApril 1964), Finland
(28thJanuary 1969), Australia (7lhJunc 1971) and New Zealand
(29th May 1973).
TheSocialistFederalRepublicofYugoslavialakespariinsonicofthework
ofthe OECD (agreement of 28thOctober 1961).
Public également en français.
OOECD, 1989
Application forpermission to reproduce or translate
all or part ofthis publication should be made to:
Headof PublicationsService, OECD
2, rue Andre-Pascal, 75775 PARIS CEDEX 16, France.
Table of contents
Introduction
I. Macroeconomic consequences of the budget deficit 10
Deficits and debt 10
Crowding out? 17
Financial consequences 21
II. Industrial adjustment 23
Introduction 23
Adjustment: productivity and export performance 25
Factors behind adjustment 33
The microeconomic role of the State 39
Conclusion 53
III. Recent developments 55
Strong growth of domestic demand 55
Continued high unemployment 60
End of disinflation? 63
Worsening current account 66
Capital and exchange-market volatility 68
IV. Policies and prospects 71
Slow fiscal adjustment 71
Monetary policy 80
Prospects for 1989 and 1990 84
V. Conclusions 88
Notes and references 95
Annexes
I. Industrial adjustment: background information 102
II. Main policy measures 112
Statistical annex 1 19
Tables
1. Trends in public deficits and debt 12
2. Changes in the general government financial balance 13
3. International comparison of government deficits and debt 15
4. Breakdown of government debt 19
5. Productivity increases in the business and manufacturing sectors 27
6. "Revealed" comparative advantage: main OECD countries 31
7. Financial position of enterprises 34
8. Public investment in Italy 40
9. Measuring the efficiency of some public services 42
10. Direct subsidies in some OECD countries 45
11. Transfers to industry, 1978-84 46
12. R&D expenditure and the diffusion of technology 50
13. Demand and supply 57
14. Households' appropriation account 58
15. Gross fixed capital formation by sector and product 59
16. Employment and the labour market 61
17. Regional indicators of unemployment in 1987 62
18. Wage indicators 65
19. Foreign trade volumes 66
20. Breakdown of changes in the current balance 66
21. Balance of payments 67
22. Central government budget 72
23. Consolidated general government account 74
24. Financing of public sector deficit and public debt 75
25. Public finance consolidation programme 77
26. Monetary aggregates 81
27. Short-term projections 86
Annex 1
Al. Structural shifts 1968-1987 106
A2. Structure of output and of imports of main OECD countries 107
A3. Adjusted intra-industry trade index 108
A4. The public sector in Italy: definitions 109
Statistical Annex
Selected background statistics 120
A. Expenditure on gross domestic product, current prices 121
B. Expenditure on gross domestic product, constant 1980 prices 122
C. Gross domestic product, by kind of activity 123
D. Household appropriation account 124
E. General government account 125
F. Prices and wages 126
G. Employment indicators 127
H. Money and credit 128
I. Foreign trade by main commodity groups 130
J. Geographical breakdown of foreign trade 131
K. Balance of payments 132
Diagrams
1. Measures of fiscal stance 1 1
2. Saving-investment balances and macroeconomic performance 14
3. International comparison of real short-term interest rates 16
4. Composition of household wealth 20
5. Trends in value added in industry and the service sector 24
6. Trade balances by principal category 29
7. External performance and competitiveness in manufacturing 30
8. Capacity-expanding investment and capacity utilisation 35
9. Unemployment and capacity utilisation 36
10. Trends in industrial activity, by size of enterprises 38
11. Contributions to GDP growth 56
12. The disinflation process 63
13. Wholesale prices 64
14. The exchange rate and competitiveness 69
15. Government expenditure and deficits: targets and outturns 78
16. Interest rates 82
17. Business indicators 85
Annex I
Al. Trade balances and capacity utilisation by sector 110
A2. Value added as a percentage of output 1 1 1
BASIC STATISTICS OF ITALY
THELAND
Area(I 000sq.km) 301.3 Populationofmajorcilics.
Agriculturalarea(1 000sq.km) 1984 217.5 1986: Thousands
Rome 2817
Milan I 479
Naples 1 201
Turin 1 025
THEPEOPLE
Residentpopulation, 1/1/1987 Thousands
(thousands) 57291 Labourforce, 1987 23669
No.ofinhabitantspersq.km 190 Employment, 1987 20836
Netnaturalincreaseinpopulation: inagriculture 2 169
annualaverage 1983-1986(thous.) 34 inindustry 6716
Nelraleper I 000inhabitants inservices II 952
(average 1983-1986) 0.6
PRODUCTION
GrossDomesticProductin 1987 Originofgrossdomesticproduct
(trillionsoflire) 982.6 in 1987(atmarketprices)
GDPperheadin 1987(USS) 13224 percentoftotal:
Grossfixedcapitalformation: Agriculture 4.1
PercentofGDPin 1987 19.9 Industry 28.6
Perheadin 1987(USJ) 2626 Construction 5.5
Other 61.8
THEPUBLICSECTOR
Publicconsumptionin 1987 Publicdebtin 1987
(percentageofGDP) 16.9 (percentageofGDP)
Currentrevenueorgeneral Generalgovernmentinvestment
governmentin 1987 in 1987 (percentage
(percentageofGDP) 40.1 oftotal investment) 17.8
FOREIGNTRADE
Exportsofgoodsandservices Importsofgoodsandservices
asapercentageofGDP, asapercentageofGDP,
1987,(OECD,SNA) 18.0 1987,(OECD,SNA) 18.3
Mainexportcategories,asapercentage Mainimportcategories,asapercentage
oftotalexports, 1987(SITC): ortotalimports, 1987(SITC):
Machinery(71 to77) 26.0 Foodstuffs(0) 12.4
Fabricsandtextilegoods(65) 6.3 Machinery(71 to77) 17.7
Chemicalproducts(5) 7.5 Metals,oresandscrap(67+68) 5.7
Automobilesandparts(78+79) 8.8 Mineralfuels(3) 13.9
Mineralfuels(3) 2.4 Chemicalproducts(5) 11.2
THECURRENCY
Monetaryunit: Lira CurrencyunitsperUSdollar,
averageofdailyfigures:
Year 1987 1 297.0
November 1988 1 304.1
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
preparedfor the annual review ofItaly by the Economic
and Development Review Committee on 21st November
1988.
After revisions in the light ofdiscussions during the
review, final approval ofthe Survey forpublication was
given bythe Committeeon 13th December1988.
The previous survey of Italy was issued in
August 1987.
Introduction
In 1988, for the fifth consecutive year, GDP growth in Italy was one of the
highestinEuropeatbetween3xhand4 percent.Thisexpansionhasbeenbasedonthe
strength of domestic demand and rapid growth of exports. As a result, the rate of
unemployment has stabilized, albeit at a level which is still high. The slowdown in
inflation came to an end towards late 1987, with the rise in consumer prices -at
nearly 5 per cent, the lowest ratefor almost twenty years-still above the European
average. Buoyantexport volumesand favourable terms-of-trade developments have
helpedtolimitthedeterioration inthecurrentbalance:theexternaldeficitfor 1988 is
estimated at around lhper cent of GDP. It is the scale and speed of adjustment in
industry since the early 1980s which are largely responsible for this sound
performance. Private firms have been the main players involved, but central
government has also devoted very substantial resources to the adjustment
process.
But the overall picture is not entirely unclouded. The results achieved on the
inflation front are largely attributable to external influences. The Lira has
appreciated in real terms since 1985, worsening Italy's competitive position. The
main source of macroeconomic disequilibrium remains the public sector deficit:
government debt continues to expand and now amounts to almost 100 per cent of
GDP.This inevitablytendstodivertdomesticsavingsfrom theprivatesector. Italso
means keeping real interest rates high, which exacerbates the accumulation ofdebt
andalsorestrictsthemonetaryauthorities' roomformanThereforeoneofthe
fundamental objectives ofeconomic policy is to reduce the government deficit, and
indeed achieve a primary surplus (i.e. exclusive of interest payments) in the near
future.
Themacroeconomicconsequencesofthefiscal imbalanceareanalysedin Part I.
Part II assesses the scale ofindustrial restructuring to date and the effectiveness of
adjustment. The role played by the authorities in this process and, in particular,
government aid to industry are discussed in greater detail. Part III looks at recent
developments in the economy. Economic policy and short-term projections are the
subject of Part IV. Policy conclusions are presented in Part V.