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.

Country Risk

Italy Country Risk

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Core Views

  • 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...

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Italy Industry Coverage (18)

Agribusiness

Italy Agribusiness

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BMI View: Our outlook for the Italian agribusiness sector has turned more positive, as we believe the dairy and livestock industries will record fairly robust growth through to 2018/19 on the back of the removal of the EU's milk production quota in 2015, and the opportunity for Italy to develop its value-added exports 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.

Key Forecasts

  • Wheat production growth to 2018/19: 9.8% to 7.7mn tonnes. We expect wheat production in Italy to remain broadly flat on...

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Autos

Italy Autos

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Vehicle sales in Italy grew 5.0% in 2014 to 1,491,965 units. This recovery in sales emerged alongside a marginally brighter macroeconomic environment for Italy in H114 compared to the recessionary 2013 period. This growth was spurred by a 4.2% expansion in passenger car sales, 16.4% growth in light commercial vehicles (LCVs) while flat sales in the heavy truck segment and a 16.7% fall in bus and coach purchases tempered vehicle sales as a whole.

Despite our worsened 2015 outlook for real GDP and private consumption growth in Italy, we expect sales growth to come to all market segments as low base effects and pent-up demand take hold. We highlight the LCV segment as the industry outperformer over the year, forecasting 9.0% growth, followed by the passenger car market, which we expect to grow 4.5%. On the whole, we forecast a 4.8% expansion in vehicle sales over the year.

We forecast a 4.5% expansion in car sales owing to...

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Commercial Banking

Italy Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

Italy Defence & Security

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BMI expects Italy to spend up to USD26.8bn on defence in 2015. The level of defence spending has fluctuated in recent years, reflecting Italy's current financial situation with the government attempting to reduce public expenditure. While defence spending in absolute terms is increasing, we forecast defence expenditure to remain stable at 1.4% of GDP over the remainder of our forecast period until 2018.

Italy's defence industry association is expected to undertake a more proactive role in promoting the country's defence exports following the appointment in September 2014 of Guido Crosetto, a former undersecretary of defence in the Italian government, to the post of chairman of the association. Crosetto was acknowledged to have worked particularly hard to promote Italian defence exports during his time in government.

Italy is still evaluating the AgustaWestland AW149 medium-lift utility helicopter...

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Food & Drink

Italy Food & Drink

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BMI View: Following thirteen consecutive quarters without growth, we forecast real GDP growth in Italy to reach -0.2% and 0.6% in 2014 and 2015. According to our forecasts, Italy's economic output will remain well below pre-crisis levels over the medium-to-long term. We forecast that annual real GDP growth will not break 1% over the next 10 years, and both public and private sector consumption will remain depressed. With one of the highest household savings rates in Europe prior to the crisis, and among the lowest private debt burdens, private consumption has not been a strong driver of GDP growth in the past decade. We do not expect this...

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Freight Transport

Italy Freight Transport

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Italy's freight mix is set for a relatively subdued 12 months in 2015 with our revising down of 2014 and 2015's real GDP growth estimate and forecast respectively as the sector's fortunes continue to reflect those of the wider economy. Italy's protracted economic recovery failed to gain traction in H114 and now faces strong headwinds from a weakening regional growth outlook.

Proving detrimental to Italy's freight sector is the fact that external account rebalancing will continue to be sub-optimal in light of weak domestic and external demand. This is characterised by an ongoing contraction of imports as opposed to strong exports or improved external competitiveness. Nevertheless, export growth will remain uninspiring and unable to drive additional current account surplus widening.

In 2015, the outperformer in terms of year-on-year (y-o-y) growth is set to be rail freight at 2.28%, ahead of both road and air freight (1....

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Infrastructure

Italy Infrastructure

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Following years of economic downturn, the general Italian economy is set to see some minor growth in 2015 (0.4%). Due to its volatility, we do not see this to immediately translate into growth in the construction sector, which overall is forecast to stagnate in 2015. Nonetheless, new investment opportunities could arise through the government's proposed initiatives, as an increase in public spending would provide funds for necessary infrastructural projects.

Key Trends And Developments:

  • Italy's economy is forecast to return to growth in 2015 (0.4%), though the construction sector is expected to continue to stagnate before returning to growth in 2016.

  • In November 2014, the municipal water supplier Romagna Acque-Societa delle Fonti S.p.A. opened bids (until...

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Insurance

Italy Insurance

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BMI View: Italy's insurance industry continues to be hampered by the subdued domestic economic outlook and there remains little scope for substantial growth within the insurance market during our forecast period to 2019. Although the future looks more promising for the life sector, where premiums have been on the increase, declines within dominating non-life lines, such as motor, will create a drag on overall growth in the short term at least. As such many leading firms are looking overseas for future growth potential.

2015 is expected to show an overall decrease in terms of gross premiums written, in part due to the decline of the euro against the strengthening US dollar. The sharpest decreases will be seen in non-life subsectors, such as motor and property insurance, where...

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Medical Devices

Italy Medical Devices

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BMI Industry View: The Italian medical device market ranks fourth in Western Europe (WE) but per capita expenditure is low by WE standards. The public sector, which accounts for around 70% of the market, is notorious for the amount of red tape and payment delays. This has affected the sustainability of small medical device companies. However, the adoption of the latest European Directive on delayed payments (Decree 192/2012) resulted in a reduction in the level of debt during 2013 and 2014. As the public sector is struggling to cope with rising costs, th e government has implemented a number of laws in recent years that will continue to...

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Metals

Italy Metals

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BMI View: The outlook for Italy's metals sector is improving but still remains far from encouraging. This is thanks to a combination of cheap Chinese imports, low domestic demand, and few project expansions, meaning that growth in consumption and production will be sluggish over the period to 2018. However, we expect Italy to retain its position as the EU's second largest steelmaking country over this time period, with a 16% share of production and the status of a ne...

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Oil & Gas

Italy Oil & Gas

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BMI View: We maintain a subdued outlook for Italy's oil and gas industry due to projected gradual decline in country's oil and gas reserves as well as rapid downsizing of its refining sector. While the increased investor interest in Italy's prospective Adriatic and gradually imporving regulatory environment are positive signs, we believe these improvements will take some years to garner more substantial industry changes.

Headline Forecasts (Italy 2013-2019)
2013e 2014e ...

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Petrochemicals

Italy Petrochemicals

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The temporary reopening of Versalis' 490,000 tonnes per annum (tpa) in Porto Marghera should help alleviate market shortages caused by the stoppage at the Shell's 910,000tpa cracker in Moerdijk, Netherlands, but BMI's latest Italy Petrochemicals Report does not envisage this situation lasting beyond 2015.

Ethylene capacity in Italy has been cut by nearly a third since the 2008 financial crisis, with a corresponding decline in derivatives production. The situation is a product both of falling domestic and regional demand as well as the decline in the competitiveness of inflexible naphtha-based crackers in the EU. While the cost of naphtha has fallen sharply alongside the decline in the price of crude, structural problems within the Italian petrochemicals industry mean this is insufficient to hold back and reverse the tide of plant closures and...

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Pharmaceuticals & Healthcare

Italy Pharmaceuticals & Healthcare

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BMI View:  SN pharmaceutical expenditure will decline in 2014 - creating revenue pressures for drugmakers and pharmacies in Italy and increasing out-of-pocket costs for the population. The government aimed to slash public healthcare costs by EUR900mn (USD1.2bn) in 2012 and EUR1.8bn (USD2.4bn) in 2013 and aims to continue to contain healthcare spending by EUR2.0bn (USD2.7bn) in 2014 and EUR2.1bn (USD2.8bn) in 2015.

Headline Expenditure Projections

  • Pharmaceuticals: EUR20.91bn (USD27.60bn) in 2013 to EUR19.94bn (USD26.71bn) in 2014; -4.7% in local currency terms and -3.2% in US dollar terms.

  • Healthcare: EUR144.30bn (USD190.48bn) in 2013 to EUR145.11bn (USD194.45bn) in 2014; +0.6% growth in local currency terms and 2.1% in US dollar...

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Power

Italy Power

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BMI View: Italy is trying hard to appeal to international investors, with the government reorganising its holdings in gas and power grid networks. The first results are promising with an imminent EUR2.1bn deal by China's State Grid International Development (SGDL) to buy a 35% stake in Italy's power grid. But the country is still suffering in the face of economic challenges and the austerity measures proposed to turn the economy around are unpopular. As such, it is of little surprise that E.ON has officially announced the will to sell its Italian operations with Gazprom, Edison and Erg reportedly potential buyers. In December 2014 Russia officially scrapped the South Stream gas pipeline, a project that could have helped transform Italy into a regional gas hub.

In addition, the sluggish economic...

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Renewables

Italy Renewables

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BMI View: We forecast non-hydropower renewable generation in Italy to grow by 3.1% in 2015, which is significantly lower than the five-year historical average. We have also maintained our long-term forecasts for the Italian renewable energy sector this quarter.

We forecast non-hydropower renewable generation in Italy to grow by 3.1% in 2015, which is significantly lower than the five-year historical average. We attribute this slowdown to the government's decision to stop granting feed-in tariffs (FiTs) for new solar installations starting July 2013, and the limited availability of FiTs available for wind energy. We have also maintained our long-term forecasts for the Italian renewable energy sector this quarter.

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Telecommunications

Italy Telecommunications

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BMI View : The Italian telecommunications sector is highly mature and very competitive. The austere economic climate has led to a weakening in consumer spending that has impacted operators of all sizes. This is exacerbated by regulatory pressure on retail and wholesale pricing even as operators are forced to invest heavily in next generation networks. This is not sustainable. WIND 's sale of telecoms towers is a small but necessary step; the potential sale of WIND to 3 Italia is a larger step, but one that is in tune with developments across Europe. Telecom Italia 's rebranding and deep spending on infrastructure is not sustainable and plans to install the operator as the leader of a new pooled broadband infrastructure provider are...

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Tourism

Italy Tourism

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Italy has a highly developed and established tourism sector with popular destinations spread across the whole central Mediterranean country. EU and Schengen membership, as well as an excellent transport infrastructure system encourages travel to, from and within the country. Positive economic developments across key tourism source markets will lead to an increase in inbound travel over the remainder of the forecast period, boosting many other market indicators. Gradually falling unemployment will contribute to growth in outbound travel over the same period, which will also have positive knock-on effects for tourism-related receipts.

Hotels and other investors are drawn to Italy because membership of the EU implies a substantial degree of market transparency and relatively strong economic and political institutions. The value of hotels and accommodation is correspondingly high, though not as great as in some countries with stronger presence of...

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Water

Italy Water

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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...

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