164 The recovery continues to rely on private demand
Transcript
164 The recovery continues to rely on private demand
3. DEVELOPMENTS IN INDIVIDUAL OECD AND SELECTED NON-MEMBER ECONOMIES ITALY GDP growth is expected to reach 1% in 2016 and 1.4% in 2017. Private consumption continues to be the main driver of the recovery. Employment growth has temporarily slowed but real income gains and pent-up demand are supporting household spending. Investment is turning around, providing some support to domestic demand, but constraints on the availability of bank credit still impede a faster investment recovery. The government has reiterated its commitment to fiscal consolidation, but at a gradual pace, and to the structural reform programme. To generate the fiscal space for a much needed increase in public investment and avert the hike in indirect taxes programmed for 2017, it plans to use EU budget flexibility rules and to contain public spending. ECB monetary policy support and gradual fiscal consolidation have stabilised the debt-to-GDP ratio, which should start decreasing in 2017. The collapse of investment in the wake of the crisis has exacerbated a long-standing labour productivity slowdown. Policy priorities to raise productivity involve speeding up the resolution of banks' non-performing loans, improving the selection process and execution of public infrastructure projects, raising public administration efficiency, and enhancing business dynamism and innovation. The recovery continues to rely on private demand Consumer and business confidence have retreated from their post-crisis peaks but remain high. Net real household income gains, driven by rising nominal income, low inflation and fiscal measures, along with pent-up demand, especially for transport vehicles and other durable goods, are sustaining private consumption despite the recent slowdown in employment growth. Producer price deflation, mainly due to declining prices of energy Italy Real household purchasing power is driving private consumption higher Index 2010=100 110 Price inflation remains low Real private consumption Net real household disposable income Core inflation¹ Headline inflation² Producer price inflation³ Y-o-y % changes 6 4 105 2 100 0 95 -2 90 2008 2010 2012 2014 2016 2011 2012 2013 2014 2015 -4 1. All items less food and energy. 2. Headline refers to the harmonised index of consumer prices and core excludes food, energy, alcohol and tobacco. 3. Industry (excluding construction). Source: OECD Economic Outlook 99 database; and ISTAT. 1 2 http://dx.doi.org/10.1787/888933367929 164 OECD ECONOMIC OUTLOOK, VOLUME 2016 ISSUE 1 © OECD 2016 – PRELIMINARY VERSION 3. DEVELOPMENTS IN INDIVIDUAL OECD AND SELECTED NON-MEMBER ECONOMIES Italy: Employment, income and inflation 3HUFHQWDJHFKDQJHV (PSOR\PHQW 8QHPSOR\PHQWUDWH &RPSHQVDWLRQRIHPSOR\HH 8QLWODERXUFRVW +RXVHKROGGLVSRVDEOHLQFRPH *'3GHIODWRU +DUPRQLVHGLQGH[RIFRQVXPHUSULFHV &RUHKDUPRQLVHGLQGH[RIFRQVXPHUSULFHV 3ULYDWHFRQVXPSWLRQGHIODWRU 'DWD IRU ZKROH HFRQRP\ HPSOR\PHQW DUH IURP WKH QDWLRQDO DFFRXQWV 7KHVH GDWD LQFOXGH DQ HVWLPDWH PDGH E\ ,VWDW IRU HPSOR\PHQW LQ WKH XQGHUJURXQG HFRQRP\ 7RWDO HPSOR\PHQW DFFRUGLQJ WR WKH QDWLRQDO DFFRXQWV LV KLJKHU WKDQ ODERXU IRUFH VXUYH\ GDWD LQGLFDWH E\ DSSUR[LPDWHO\ PLOOLRQ RU DERXW 7KH XQHPSOR\PHQW UDWH LV FDOFXODWHGUHODWLYHWRODERXUIRUFHVXUYH\GDWD $VDSHUFHQWDJHRIODERXUIRUFH ,QWKHWRWDOHFRQRP\ +DUPRQLVHGLQGH[RIFRQVXPHUSULFHVH[FOXGLQJIRRGHQHUJ\DOFRKRODQGWREDFFR 6RXUFH 2(&'(FRQRPLF2XWORRNGDWDEDVH 1 2 http://dx.doi.org/10.1787/888933369052 and petroleum-based products, weak inflation expectations and still large spare capacity are exerting downward pressures on consumer price inflation. After a slowdown in late 2015, the recovery is set to regain strength, driven by private consumption and, to a lesser extent, by a moderate investment recovery. Industrial production is trending up, with recent gains attributable to a large extent to capital and consumer durable goods. The increase in capital goods production and the trough reached in the construction sector indicate that investment may finally be turning around. However, bank credit supply constraints, along with uncertainty about future demand conditions, hinder a strong recovery of investment. The government is paving the way to create a secondary market for non-performing loans and improve banks' balance sheets, Italy The rise in the production of capital goods anticipates a gradual investment recovery Low capital accumulation and technical progress are slowing labour productivity growth Q-o-q annualised % changes 20 Real gross fixed capital formation Industrial production - capital goods 15 Multifactor productivity Capital per worker Potential output per worker % changes 2.5 2.0 10 1.5 5 1.0 0 0.5 -5 0.0 -10 -0.5 -15 -20 2010 2011 2012 2013 2014 2015 2016 2017 1990 1995 2000 2005 2010 2015 -1.0 Source: OECD Economic Outlook 99 database; and ISTAT. 1 2 http://dx.doi.org/10.1787/888933367938 OECD ECONOMIC OUTLOOK, VOLUME 2016 ISSUE 1 © OECD 2016 – PRELIMINARY VERSION 165 3. DEVELOPMENTS IN INDIVIDUAL OECD AND SELECTED NON-MEMBER ECONOMIES Italy: Financial indicators +RXVHKROGVDYLQJUDWLRQHW *HQHUDOJRYHUQPHQWILQDQFLDOEDODQFH *HQHUDOJRYHUQPHQWJURVVGHEW *HQHUDOJRYHUQPHQWGHEW0DDVWULFKWGHILQLWLRQ &XUUHQWDFFRXQWEDODQFH 6KRUWWHUPLQWHUHVWUDWH /RQJWHUPLQWHUHVWUDWH 1HWVDYLQJDVDSHUFHQWDJHRIQHWGLVSRVDEOHLQFRPH,QFOXGHV³IDPLJOLHSURGXWWULFL´ $VDSHUFHQWDJHRI*'37KHVHILJXUHVDUHQDWLRQDODFFRXQWVEDVLVWKH\GLIIHUE\IURPWKHIUHTXHQWO\ TXRWHG([FHVVLYH'HILFLW3URFHGXUHILJXUHV PRQWKLQWHUEDQNUDWH \HDUJRYHUQPHQWERQGV 6RXUFH 2(&'(FRQRPLF2XWORRNGDWDEDVH 1 2 http://dx.doi.org/10.1787/888933369061 an important precondition to raise credit supply and investment. Sluggish external demand has been holding back export growth, while robust private consumption has been sustaining import growth. Boosting productivity is key to propelling output growth The budget deficit declined to 2.6% of GDP in 2015 and is projected to decrease further, largely as a result of the cyclical recovery and low interest rates. The government plans to contain public spending and fully use the flexibility available under EU deficit rules, equivalent to about 0.8% of GDP, to raise public investment, slightly lower taxes and avert a hike in indirect taxes previously programmed for 2017. Rationalising and reducing public spending is a priority, but it will depend in part on raising public-administration efficiency. Permanently lowering social security contributions, especially for those on low salaries, Italy: Demand and output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http://dx.doi.org/10.1787/888933369077 166 OECD ECONOMIC OUTLOOK, VOLUME 2016 ISSUE 1 © OECD 2016 – PRELIMINARY VERSION 3. DEVELOPMENTS IN INDIVIDUAL OECD AND SELECTED NON-MEMBER ECONOMIES coupled with effective active labour market policies, and shifting the tax burden towards consumption and real estate, based on updated cadastral value, would lay the foundations for a stronger and more equitable growth. Progress on the structural reform programme is contributing to strengthening long-term growth prospects, but more needs to be done to boost productivity and inclusiveness. The National Agency for Active Labour Market Polices, established under the Jobs Act to coordinate and evaluate activation policies, will be key to bringing more people into good jobs and reduce job-skill mismatch – but it has yet to become operational. Reducing youth unemployment, which is still high, will hinge on better coordinating education and labour market policies. Fully and rapidly implementing the Good School reform and the Jobs Act would be meaningful steps in the right direction. Strengthening the provision of good quality care for children and the elderly would remove barriers keeping women from fully participating in the labour market. Raising the efficiency of the public administration would contribute to higher aggregate productivity. The ongoing, but only partly approved, public administration reform will introduce a more performance-oriented human resource system, rationalise enterprises owned by local authorities, set time limits for administrative procedures concerning large investment projects, and extend the access to public services by electronic means. However, implementation will be crucial. Continuing the efforts to accelerate judicial proceedings is critical as lengthy trials undermine the rule of law and reduce investment. Boosting the quantity and quality of public and private investment will be crucial to make the recovery sustainable. Implementing the new public procurement code for construction works, improving and accelerating project selection and execution, and vigorously fighting corruption will enhance the quality of public capital spending. The government has recently approved a decree to shorten the process of debt recovery for new loans and existing ones – if both parties agree. Further steps in reforming bankruptcy procedures might be needed to complement the measures already taken. Growth is expected to regain momentum GDP growth is projected to rise to 1% this year and 1.4% next year. Rising real household disposable income and improving labour market conditions will buttress private spending. Gross fixed capital formation will continue its gradual recovery and modestly accelerate in 2017. Robust internal demand will result in imports growing faster than exports. Inflation will remain low, reflecting continued product and labour market slack. The recovery of investment will depend on the effects of the government's initiatives to remove bad loans from banks’ balance sheets and create a secondary market for them. A faster recovery than anticipated of main trading partners would boost exports and growth. Geopolitical uncertainties in the Mediterranean region remain high; the refugee crisis and the costs it entails will depend on how they evolve. Delays in implementing the ambitious public investment programme and sufficiently cut public expenditure to avoid the hike in indirect taxes, for which Italy successfully invoked EU budget flexibility rules, would slow the recovery and worsen the fiscal position. The event of Brexit and renewed financial market turmoil in the euro area could raise risk spreads, and debt financing costs, requiring more fiscal restraint. Private consumption growth could be lower than projected if the reduction in social-security-contribution exemptions affects employment growth more than expected. OECD ECONOMIC OUTLOOK, VOLUME 2016 ISSUE 1 © OECD 2016 – PRELIMINARY VERSION 167