Italy's many structural economic weaknesses have been brought to light by the eurozone debt crisis. The country has a comparative advantage in a number of areas, including industrial design and innovation, fashion and clothing. However, there has been a lack of significant structural reforms to address Italy's decline in productivity growth and external competitiveness, which raises the risk that the country’s public sector debt burden will become unsustainable.
We keep our clients abreast of the latest market moves and political developments in Italy, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 18 of Italy’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. Our aim is to keep you ahead of the curve, so you can operate with confidence in Italy.
Italy Country Risk
Italy will return to modest growth in 2014 and 2015, although a weak labour market and ongoing contraction in credit growth will continue to impede a more robust recovery.
We view positively the urgent structural reform agenda of new Prime Minister Matteo Renzi. However, we remain sceptical that he will be able to avoid the chronic instability, political infighting and rigid vested interests that that have in the past impeded reform efforts.
Lack of significant structural reform in previous years seriously jeopardises Italy's long-term growth trajectory, and raises the risks that the public sector debt burden will become unsustainable.
Even if reforms aimed at addressing Italy's decline in productivity growth and external competitiveness are passed, an ageing demographic profile will make debt consolidation efforts over...
Italy Industry Coverage (18)
BMI View: We have made modest revisions to our Q1 2016 Italian agribusiness report and now hold a mixed outlook. We believe that the cheese, milk, poultry and pork industries will record stable growth though to 2018/19. The removal of the EU's milk production quota in 2015 and the opportunity for Italy to develop its value-added exports will be positives. We expect corn production to post the strongest growth out of the grains complex, largely due to base effects, as we believe wheat output will remain broadly flat due to little opportunity for area or yield growth.
Poultry production will record growth of 1.3% in 2015/16 to reach 1.29mn tonnes.
Pork production will reach an estimated 1.70mn tonnes.
Liquid milk consumption will reach 2.32mn tonnes...
BMI View: Pent-up demand and the need to replace the country's ageing fleet, alongside modest upticks in consumer spending and cheap borrowing costs, will provide strong supports to new car sales.
Pent-up demand and the need to replace the country's ageing fleet will encourage new car sales.
Historically low interest rates will spur auto loans growth.
Commercial vehicles will outperform due to an uptick in business confidence and rising capital expenditure.
Vehicle production will continue double-digit expansion as Fiat Chrysler Automobiles increases the output of Alfa Romeos in time for new releases.
|Passenger Car and Light Commercial Vehicle Sales|
Italy Commercial Banking
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Defence & Security
Italy Defence & Security
BMI View : We expect Italy's defence budget to continue to decrease in 2016, albeit at a slower rate than previous years. However, much like its neighbours, Italy is gaining awareness of the importance of developing a well-equipped and more mobile armed forces in order to tackle the international challenges that have emerged in the last decade. As such, in 2015, it published its first Defence White Paper since 1985, which highlights the importance of increasing the defence budget in order to also increase procurements and contracts to modernise its forces. This will therefore...
Food & Drink
Italy Food & Drink
BMI View: Italy's food and drink industry will gradually improve over 2016 and 2017, with growth stemming from a continued economic recovery, low inflation and high levels of consumer confidence. The country's large ageing population will increase demand for traditional foods, while growth in convenience items, such as frozen foods, remains slow. The Italian drinks market is highly developed and we expect to see only modest growth in this sector, predominantly driven by premiumisation.
|Food and Drink Spending|
Italy Freight Transport
BMI View: 2016 will be a good year for Italy's freight sector as the upswing in domestic consumption will stimulate road freight growth and as exports of cars and pharmaceuticals will show more dynamism than observed in recent years, which will feed through into growth of rail and air freight. Over the medium term, we expect growth in Italy's freight sector to slow down considerably as economic growth will be muted and exports will face strong competitiveness issues.
We have revised up (modestly) our forecasts for Italian real GDP growth in 2016 and 2017, to 1.2% and 1.0% respectively, from 1.1% and 0.9% as the recovery in domestic consumption will be strong. Over the medium term, however, we hold a bearish view with regards to the Italian economy, as the moderate recovery in domestic consumption will be insufficient to offset the...
BMI View: The outlook for Italy's construction sector, although an improvement on previous years, remains largely subdued. The weak housing market and lack of public spending capacity for large-scale social infrastructure projects, due to ongoing austerity measures, will continue to dampen overall growth prospects. As such, growth in Italy's construction industry largely depends on several major transport infrastructure projects - particularly domestic and cross-border railway connections - as well as energy projects aimed at increasing the share of renewables in the market. While some progress is being made on...
BMI View : Results registered by the major insurers in Q116 and H116 have been mixed. Generali posted a 1.3% rise in premiums in the non-life sector, while reporting a 3.5% decline in life premiums. UnipolSai, the biggest player in the non-life sector, registered a 0.6% decline in non-life premiums in Q116 to EUR1.796bn. However, we retain our forecasts for modest growth in both sectors in 2016, before an acceleration in growth from 2017 and 2018, with growth in the non-life sector set to outstrip that in the life sector. A gradually improving consumer environment underpins our forecasts for growth in...
Italy Medical Devices
BMI View: Italy will remain the fourth largest market in Western Europe but also the slowest growing, restricted by a weak euro, healthcare cost-containment measures and a fragile import performance. Per capita expenditure will remain very low by regional standards. Despite improvements, small companies will have to deal with a notorious amount of red tape and payment delays in the public sector, which represents about 70% of the market.
Oil & Gas
Italy Oil & Gas
BMI View: Italy's oil and gas sector will continue to suffer from a gradual depletion of its hydrocarbon reserves and the rapid downsizing of the country's ailing refining sector. While an active exploration scene and a gradually improving regulatory environment are positive signs, we believe these improvements will take some years to garner more substantial industry changes.
BMI View: The Italian petrochemicals industry is completing a process of transition to more high-value, lower-volume production that should help boost commercial viability in the long run. It will capitalise on its strength in elastomers with export-led growth in the country's automotive sector stimulating growth for tyres. However, Italian producers such as Versalis are increasingly looking to markets in Asia for growth and there may be limited interest in investing locally.
In Q116, primary plastic output fell 7.9% y-o-y, while the output of plastic products grew 3.5% and rubber products rose 2.0%. The sharp decline in primary plastic came in January, but by the end of the quarter had recovered to more typical levels, indicating that this was not indicative of a trend. Any decline in primary plastic production restricts the local availability of raw material for plastic products and...
Pharmaceuticals & Healthcare
Italy Pharmaceuticals & Healthcare
BMI View: While the implementation of cost containment policies targeting the pharmaceutical industry in Italy may work to prevent the healthcare expenditure budget from overshooting, in the long term, such policies may lower incentives for structural reforms of the healthcare sector as in theory they do not guarantee the efficient provision and management of healthcare services. The Italian public sector operates through regional autonomous communities, resulting in a decentralised approach to drug procurement and healthcare provision.
Headline Expenditure Projections
Pharmaceuticals: EUR22.04bn (USD29.53bn) in 2014 to EUR21.74bn (USD23.92bn) in 2015; -1.3% in local currency terms and -19.0% in US dollar terms....
BMI View: Italy's power sector faces numerous challenges in the short- to medium term. As well as falling energy prices across Europe, consumption rates are also declining in Italy, undermining demand for any new installed capacity. Many power firms are phasing out ageing coal-fired power plants and overall we expect to see a decline in thermal capacity over the forecast period. Some growth will be realised in the non-hydropower renewables sector, particularly solar and wind power, which are already well established in Italy. We also expect to see further solid investment in the country's national transmission grid, as well as upgrades and expansion work to cross-border connections. The primary risk to our forecasts, and to investor interest, stems from an uncertain regulatory environment in relation to renewable...
BMI View: We maintain our muted non-hydro renewables forecast for this quarter, as punitive subsidy cuts over the last three years and uncertainty over the specifics over the long-term renewables expansion plans will continue to be potent obstacles to a rebound in investor sentiment. While we are seeing some movements on the behalf of the Italian government to restart growth, and PV solar is reaching grid parity in some parts of the country, a pick-up in growth will be contingent on an improvement in the government track record for renewables policy.
BMI View: The recovery in Italy's retail sector will remain slow and fragile. Over the short term, consumers will benefit from the disinflationary environment, government tax cuts and low interest rates. However, the difficult labour market situation and tepid economic expansion will prevent any meaningful growth in household spending over 2016.
|Headline Household Spending|
BMI View : With a penetration rate of over 137%, Italy's mobile market is already saturated. However, it also supports a large number of inactive prepaid accounts and the deduction of these accounts from the subscriber data reported by Italy's mobile operators will result in negative market growth for the duration of our five year forecast. Price competition is fierce and this has put downward pressure on APRUs. The upcoming merger between WIND and 3 Italia will help weaken price competition. Nevertheless, the mobile market will remain challenging environment in which to generate value, with four out of five users on prepaid plans. The migration of customers to postpaid plans, together with better economic conditions, will have a positive impact on...
BMI View: Our current forecast envisages a positive outlook for the Italian tourism sector in 2016 and beyond, out towards the end of our current forecast period in 2020. We believe that the Italian tourism sector as a whole is well developed and benefits from the status of Italy as a popular tourist destination. Italy has long been viewed as a destination that draws a wide variety of travellers to its rich and vibrant history, architectural and historical landmarks, pristine beaches and hospitable culture. Out towards our present forecast period, we are expecting total arrivals to grow significantly, jumping from an estimated 84.8mn in 2016 to over 96.55mn by end of 2020. Key drivers of growth boosting inbound...
BMI View: We have extended our forecasts this quarter to cover new indicators, including extraction by source (lake, river, reservoir, desalination, ground water, spring water, and non-mains consumption). Overall we maintain our outlook on the Italian water sector, emphasising the need for further consolidation, improved management and additional investment. However, given the economic slowdown and continued government financing issues, we do not anticipate much in the way of improvement over our forecast period.
The water sector represents a significant potential growth area in Italy, as the government is keen to attract international investors. However, as with the construction sector as a...