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 over...

Italy Industry Coverage (27)

Agribusiness

Italy Agribusiness

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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.

Key Forecasts

  • 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...

Autos

Italy Autos

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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.

Key Views

  • 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
(2013...

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

Defence & Security

Italy Defence & Security

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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

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BMI View: Italy's consumer outlook will gradually improve over 2016 and 2017, with growth stemming from the recovery of economic conditions. The country's large ageing population will drive demand for traditional foods, while the growth convenience, such as frozen foods, remains slow. Italy's drinks industry will continue to experience modest growth owing to the highly mature nature of the market, driven by premiumisation.

Food & Drink Spending
(2013-2020)
...

Freight Transport

Italy Freight Transport

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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...

Infrastructure

Italy Infrastructure

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BMI View: Italy's construction sector is expected to see a marginal return to growth in 2016, although the overall market value will remain well below that of pre-2008 peak values. Limited public spending capacity will continue to hamper investment is social and utilities infrastructure, while a weak housing market means there is limited demand for residential construction. As such Italy relies largely on transport infrastructure to stimulate growth in the construction sector: several major rail projects are planned or under way, many of which are benefiting from regional financing. Limited labour market reforms and an uncertain regulatory...

Insurance

Italy Insurance

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BMI View: A gradually improving consumer environment underpins our forecasts for growth in Italy's insurance sector over the next few years. Falling unemployment, low inflation and rising disposable incomes will support demand for life insurance and other personal lines. Many larger Italian insurers have reported positive earnings over recent quarters, reflecting the wider improvement in the operating environment. We expect the health and personal accident insurance markets to be the main beneficiaries of this environment in the non-life market as the government's austerity measures and the scaling back of health and welfare provision encourages take-up of insurance products. However, we expect premium growth to be weaker in the motor and property markets which are both mature and competitive.

Headline Insurance...

Medical Devices

Italy Medical Devices

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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.

Projected Medical Device Market, 2014-2019
...

Metals

Italy Metals

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BMI View: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.

Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f ...

Italy Metals

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BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.

...
Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Italy Metals

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BMI View: Despite the strong H116 iron ore price rally, prices will edge lower due to weakening Chinese consumption over the latter half of 2016. From 2017 onwards, iron ore prices will remain subdued as iron ore prices remain under pressure from an over-supplied seaborne market, driven by strong production growth in Australia and Brazil, and weak consumption growth in China.

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Global - Iron Ore Production Forecasts
2013 2014 2015e 2016f

Italy Metals

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BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

...
Global Nickel Forecasts
2013 2014 2015e

Italy Metals

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BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

Italy Metals

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BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.

BMI Gold Forecasts
2014 2015 2016f ...

Italy Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

Italy Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

...
Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

Italy Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

...
BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Oil & Gas

Italy Oil & Gas

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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.

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

Petrochemicals

Italy Petrochemicals

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The Italian petrochemicals market is brightening as growth returns to the manufacturing sector, with stronger economic growth bolstered by both domestic demand and export growth. However, more and more of Italy's petrochemicals requirements are imported as the country's industry emerges from a period of massive capacity cutbacks, with potentially more in store. Italy's main petrochemicals producer, Versalis, is responding by diversifying its Italian operations into high-value bio-plastics, a reorientation that is likely to pay off.

The revived 490,000 tonnes per annum (tpa) Porto Marghera cracker will continue operations in 2016 following an agreement with an unnamed buyer for an unknown supply of ethylene. Lower naphtha feedstock costs are enabling it to continue operating longer than the planned date of closure in September 2015. Eventually, the plant will be replaced by bio-based chemical...

Pharmaceuticals & Healthcare

Italy Pharmaceuticals & Healthcare

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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.

  • ...

Power

Italy Power

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BMI View: Non-hydropower renewables and transmission networks will see most investment within Italy's power sector over the coming years, due to planned incentives for non-PV renewables and a growing focus on the development of new cross-border power interconnections. Amid falling wholesale power prices and stagnant power consumption growth, continued delays in the introduction of a capacity...

Renewables

Italy Renewables

BMI View:

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.

Renewables Headline Forecasts (Italy 2014-2020)
...

Retail

Italy Retail

BMI View:

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
(2014-2020)
...

Telecommunications

Italy Telecommunications

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BMI View : At the end of 2015 Telecom Italia unveiled its 2016-18 investment plan, including projected spending of EUR12bn in Italy over the next three years, with EUR1.2bn going on the rollout of LTE mobile ultra-broadband services. LTE customers are expected to account for around 70% of mobile broadband customers by 2018, thanks to almost blanket coverage of the country at 75Mbps, with peaks of 300Mbps in the eight main cities thanks to the use of carrier aggregation technologies. Within the wider market BMI notes the continuation of strong demand for mobile content and services based on 3G and 4G technologies. Along with the development of fixed fibre optic ultra-broadband infrastructure, 3G...

Tourism

Italy Tourism

BMI View:

BMI View: We maintain a positive outlook for the Italian tourism sector owing to a variety of factors in 2016 and beyond, out to end of our current forecast period in 2020. The Italian tourism sector is large and well-developed and the country benefits from its status as a popular tourist destination, with travellers drawn to its rich and vibrant history, architectural landmarks, pristine beaches and hospitable landscape. Over our present forecast period, total arrivals will grow significantly, bolstered by a weaker euro, as conditions continue to improve in many crucial source markets. Economic growth in Asia and Middle-East will result in strong tourism links with Italy over the medium- and long-terms with Qatar in particular looking to Italy as a key destination.

Although the tourism sector is massive, it is faced with market maturity and opportunities for new entrants may be somewhat...

Water

Italy Water

BMI View:

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...

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