Oecd Economic Surveys : Italy 1982-1983.

82 Pages·5.342 MB·English

by  OECD

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPERATION ET OE D E V E L 0 P P E M E N T ECONOMIQOES
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OECD ECONOMIC SURVEYS
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ITALY
DECEMBER 1982
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Development
(OECD) was set up under a Convention signed in Paris on 14th
December 1960, which provides that the OECD shall promote policies
designed:
to achieve the highestsustainableeconomicgrowth and employ¬
ment and a rising standardofliving in Member countries, while
maintainingfinancialstability,andthustocontributetothedeve¬
lopment of the world economy;
tocontributetosoundeconomicexpansioninMemberaswellas
non-member countries in the process ofeconomic development;
to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international
obligations.
The Members ofOECD are Australia, Austria. Belgium, Canada,
Denmark, Finland, France, the Federal Republic ofGermany, Greece.
Iceland, Ireland, Italy.Japan, Luxembourg, the Netherlands, NewZea¬
land,Norway,Portugal,Spain,Sweden,Swit7.erland.Turkey,theUnited
Kingdom and the United States.
TheSocialistFederalRepublicofYugoslavia is associated in certain
work oftheOECD,particularlythatoftheEconomic and Development
Review Committee.
©OECD, 1982
Application forpermission to reproduce or translateall or part ofthis publication should be made to:
DirectorofInformation, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
CONTENTS
Introduction 7
I. Recent trends 8
Output and domestic demand 11
Employment, productivity and unemployment 14
Prices and incomes 18
Some medium-term aspects of wage developments 21
II. Balance of payments 27
Foreign trade 28
Current account balance 31
Capital movements and exchange rate 33
III. Economic policy 36
Fiscal policy 36
Monetary policy 42
Other aspects of economic policy 47
IV. Short-term prospects 48
V. Policy conclusions 51
Annexes
I. Energy policies 57
II. Chronology of economic policy measures 59
Statistical annex 63
TABLES
Text
1. Demand and output 11
2. Gross fixed investment by branch and by agent 12
3. Households' appropriation account 13
4. Recent trends in the labour market 15
5. Dispersion of unemployment in 1981 17
6. Wages and unit costs in manufacturing 19
7. Recent price trends 19
8. International comparison of prices and wages 21
9. Medium-term wage trends 22
10. Wages and employment in manufacturing 24
11. Recent trends in the current account balance 31
12. External financial position 34
13. Consolidated account of general government 37
14. Central government budget: forecasts and outturns 41
15. Transactions of the banking system and special credit institutions 43
16. Structure of external financing of firms 44
17. Short-term forecasts 49
Statistical annex
A. National accounts 64
B. Quarterly national accounts 65
C. Price indices 66
D. Employment 67
E. Wages and salaries 68
F. Public sector accounts 69
G. Money and credit 71
H. Balance of payments 73
I. Foreign trade and reserves 74
J. Commodity breakdown of foreign trade 75
K. Area breakdown of foreign trade 76
DIAGRAMS
1. Comparison of growth 9
2. Recent trends in demand and output 10
3. Employment, productivity and unemployment 16
4. Comparison of consumer prices 18
5. Wage growth in manufacturing 23
6. Real wages and productivity 26
7. Competitiveness and market shares 29
8. Current account and relative cyclical position 32
9. Exchange rates 35
10. Public sector transactions 39
11. Interest rates 45
12. Money and growth 46
BASIC STATISTICS OF ITALY
THELAND
Area(l 000sq.km) 1979 301.3 Populationofmajorcities,
Agriculturalarea(1 000sq.km) 1981: Thousands
1979 270.0 Rome 2831
Milan 1 635
Naples 1 211
Turin 1 104
THEPEOPLE
Residentpopulation, 1981 Thousands
(thousands) 56244 Labourforce, 1981 22665
No.ofinhabitantspersq.km 187 Employment, 198! 20752
Netnaturalincreaseinpopulation: inagriculture 2759
annualaverage 1971-1981 (thous.) 211 inindustry 7728
Netraleper 1 000inhabitants inservices 10265
(average 1971-1981) 3.9
PRODUCTION
GrossDomesticProductin 1981 Originofgrossdomesticproduct
(billionsoflire) 398 125 in 1981 (atmarketprices)
GDPperheadin 1981 (US$) 6227 percentoftotal:
Grossfixedcapitalformation: Agriculture 5.9
PercentofGDPin 1981 20.3 Industry 33.4
Perheadin 1981 (US$) 1 264 Construction 8.0
Other 52.7
THEPUBLICSECTOR
Publicconsumptionin 1981 Internalpublicdebtin 1981
(percentageofGDP) 18.6 (percentageofGDP) 69.0
Current revenueofgeneral Generalgovernment investment
governmentin 1981 in 1981 (percentage
(percentageofGDP) 39.3 oftotal investment) 18.4
FOREIGNTRADE
Exportsofgoodsandservices Importsofgoodsandservices
asapercentageofGDP, asapercentageofGDP,
1981,(OECD,SNA) 26.9 1981,(OECD,SNA) 28.8
Mainexportcategories,asapercentage Main importcategories,asapercentage
oftotalexports, 1981 (SITC): oftotal imports, 1981 (SITC):
Machinery(71 to77) 23.0 Foodstuffs(0) 10.7
Fabricsandtextilegoods(65) 5.5 Machinery(71 to77) 11.8
Chemicalproducts(5) 6.9 Metals,oresandscrap(67 + 68) 4.8
Automobilesandparts(78 + 79) 9.1 Mineralfuels(3) 34.7
Mineralfuels(3) 6.4 Chemicalproducts (5) 7.9
THECURRENCY
Monetaryunit: Lira CurrencyunitsperUSdollar,
averageofdailyfigures:
Year 198] 1 136.55
August 1982 1 389.84
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudypreparedfor
the annual review ofItaly by the Economic and Development
Review Committee on 13th October 1982.
Afterrevisionsinlightofdiscussionsduringthereview,final
approvaloftheSurveyforpublicationwasgivenbytheCommittee
on 12th November J982.
INTRODUCTION
After having grown rapidly during the upswing of the cycle from 1978 to
1980, the Italian economy has been in a phase of virtual stagnation of activity
over the last two years, like most other OECD countries. The pause in growth
has been accompanied by a marked slowdown in inflation and a reduction of
the current account deficit through 1981, without however the main factors of
imbalance, in particular those concerning wage determination and the public
sector deficit, being significantly changed. Thus, little further progress was made
in the first half of 1982: consumer prices stabilized at an annual rate of around
16 per cent and the current account deficit was around $ 6 billion (annual rate).
Finally, the labour market situation showed some fairly sharp contrasts: industrial
employment fell significantly, resulting in productivity gains which were excep¬
tional for Italy during a phase of sluggish activity, but the rapid growth of
employment in services alleviated the effects on unemployment. Nonetheless,
in July 1982 there were over 2 million people unemployed, around 9 per cent
of the labour force.
As in the majority of OECD countries, thé authorities devoted priority
during 1980-1981 to the fight against inflation and to an improvement in the
foreign balance, by giving a strongly restrictive stance to monetary and fiscal
policy, by imposing a temporary import deposit scheme, and by adjusting the
lira's central rate within the EMS three times in the space of eighteen months.
Moreover, an incomes policy began in 1982. Nonetheless, the government once
again experienced considerable difficulties in controlling public expenditure.
Whereas it had been the government's intention to stabilize, as a percentage of
GDP, both public expenditure and the deficit at their 1980 levels, the share of
expenditure rose in 1981 by nearly 5 points to reach around 51 per cent of
GDP, whilst the borrowing requirement increased to nearly 12 per cent of GDP.
The overshooting of initial aims has again been very considerable in 1982, and
in July the government decided to increase tax pressure. The disequilibrium
of public finance has certainly helped to support domestic demand and thus made
it more difficult for the monetary authorities to act. Although control of domestic
lending to the private sector, notably by means of bank credit restrictions, proved
fairly successful, growth of total domestic credit was much more rapid than
expected because of the increase in the public sector borrowing requirement.
Interest rates were raised considerably and, for the first time since the early
seventies, are durably positive in real terms. When presenting the draft budget
for 1983, the government once again reaffirmed its intention to stabilize the
level of the Treasury deficit.
One of the main uncertainties is the outcome of the wage round in 1983,
which concerns both total wage costs and the indexation system. Without anti¬
cipating the results of these negotiations, it has been assumed for forecasting
purposes that, given the overall economic situation, real wage growth will be
modest, but the risk of much stronger rises in 1983 should not be excluded.
On the technical assumption of an unchanged exchange rate, import prices
should help to slow down production costs. Nevertheless, the inflation rate
may remain close to 16 per cent, whereas the government's aim is to reduce
the rise in the GDP deflator to 13 per cent. In this context it is unlikely
that monetary policy can be eased in the near future and the upturn in domestic
demand will probably only be gradual, largely through increases in public and
private consumption. The possibility of a pick-up in Italy will depend particularly
on developments in principal trading partners. However, international prospects
hardly appear to be improving, particularly in Europe. Thus, real GDP growth
is likely to remain limited throughout 1983. In this context of weak growth,
domestic imbalances are likely to remain pronounced.
This Survey first describes the recent trends in the domestic sector of the
Italian economy. In order to identify the background against which the present
wage negotiations are taking place, a section deals with the trend of wages over
the past decade and the reactions of the government and enterprises to the
acceleration of wage costs. Balance-of-payments and foreign sector develop¬
ments are described in Part II. The third part analyses the actions of the
public authorities in 1981 and 1982. The short-term forecasts and policy
conclusions are presented in the final two sections.
I. RECENT TRENDS
Like many OECD countries, Italy has been in a phase of activity stagnation,
owing to the effect on real disposable income of"the terms-of-trade deterioration
(which in the Italian case was particularly marked1 in 1981), the slowdown in
international trade and restrictive monetary policy. Nonetheless, the pause in
growth follows a period of exceptionally marked expansion from 1978 to 1980
so that, on average, Italy's growth was considerably stronger than that of its
principal European trading partners over the last cycle2. This development
contrasts with that experienced after the first oil crisis, which came at a time
when the economy's adjustment to the new conditions of production, and in
particular, the changes in labour organisation stemming from the 1969 "hot
autumn", had not been completed, the result being a rapid fall in activity and
one that was much steeper than in the other major OECD countries3. Although
1. The cumulative terms of trade deterioration during 1978-1981 was 23 per cent of
national income compared with 13 per cent for the average of European OECD countries.
2. Percentage change in real GDP (annual average)
Italy EEC
1978-1981 2.9 1.4
1974-1978 1.7 2.3
1970-1974 4.0 3.7
3.
Italy Six other large countries
OPEC I
Period 1974Ql to 1975Q2 (5Q) 1973 Ql to 1975Ql (8Q)
Change in GDP -4.8% 0.2%
OPEC II
Period 1980Ql to 1981 Q4(7Q) 1980Ql to 1981 Q4 (7Q)
Change in GDP -0.3% 0.5%
Diagram I. Comparisonofgrowth
GrosiDomestic Product
4 1
DEVIATION FROM
3 - TREND s \ 3
2 - EEC(excludingItaly) 2
\ 1
0 - 0
r^(cid:9)/
-1 - -1
A
-2 - -2
V Italy
-3 - -3
-4
140
135
130
125
120
115
110
105
100
Total DomesticDemand 95
%
DEVIATION FROM TREND 6
A
4 / \ 4
/ \
EEC(excludingItaly)
2 2
0 0
-2 v A \-/ -2
-4 V' Italy -4