OECD Economic Survey of ITALY 2024 - Presentation

OECD ECONOMIC SURVEY OF

ITALY

Restoring strong and sustainable growth Rome 22 January 2023 oe.cd/italy @OECDeconomy @OECD

The economy has been remarkably resilient compared with other large euro area countries Real GDP Index, 2019Q4=100 105 100 95 90 85

Italy

France

Germany

Spain

80 75

2020

Source: OECD Economic Outlook 114 database.

2021

2022

2023

Exports have performed strongly Real exports

Index, 2019Q4=100 130 Italy

120

France

Germany

Spain

110 100 90 80 70

2015

2016

Source: OECD Economic Outlook 114 database.

2017

2018

2019

2020

2021

2022

The health of the banking sector has improved but risks are rising Net non-performing loans Per cent of total gross loans

12 Italy

Euro area

OECD

10 8 6 4 2 0

2010

2011

2012

2013

2014

2015

Source: International Monetary Fund; European Central Bank.

2016

2017

2018

2019

2020

2021

2022

Housing investment has turned Real Investment Index, 2019Q4 = 100 180 Business

Housing

160 140 120 100 80 60

2020

Source: OECD Economic Outlook 114 database.

2021

2022

2023

Growth is projected to pick up only slowly 2022

2023

2024

2025

Real GDP growth (%)

3.9

0.7

0.7

1.2

Consumer price index (%)

8.7

5.9

2.6

2.3

Government budget balance (% of GDP)

-8.0

-5.4

-4.2

-3.6

Public debt (% of GDP)

141.6

141.4

141.4

140.5

Source: OECD.

Strengthening public finances

Public spending pressures are set to rise Public spending on ageing-related costs and interest payments % of GDP 40

Ageing costs

Interest spending

35 30 25 20 15 10

2020

2023

2025

Note: Ageing costs include old-age and survivors’ pensions, health and long-term care.

Source: European Commission (2021); OECD Long-Term Baseline database.

2030

2035

2040

Reforms are required to ensure fiscal sustainability Public debt % of GDP

200 180 160 140 120 100 80 60

Existing tax and spending policies Proposed EU fiscal rules (primary surplus of 3% of GDP by 2031) Proposed EU fiscal rules + structural reforms 2025

2030

2035

2040

2045

2050

2055

2060

Note: The “Existing tax and spending policies” scenario assumes that the structural primary fiscal balance before accounting for net ageing-related costs remains constant at 2025 levels and the headline balance declines with rising net ageing costs and interest expenditure. Net ageing costs are defined as changes in expenditure on old-age pension, health and long-term care minus changes in expenditure on education. The “Proposed EU fiscal rules” scenario is based on a stylised version of the Commission’s reform proposals. It assumes that (a) the primary balance is raised by 0.5% GDP when the headline budget deficit exceeds 3% of GDP; (b) public debt as a share of GDP is lower in 2031 than in 2024; and (c) public debt as share of GDP is on a declining path in 2031. The “Proposed EU fiscal rules + structural reforms scenario” additionally assumes higher GDP growth from the implementation of the ambitious package of structural reforms proposed in the 2024 OECD Economic Survey of Italy.

Source: OECD calculations based on OECD Economic Outlook database and OECD Long-Term Model.

Budget balance needs to improve over 2025-31 to meet new EU fiscal rules Required change in the underlying primary budget balance relative to 2024 % of GDP 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Source: OECD

2024

2025

2026

2027

2028

2029

2030

2031

A solidarity contribution from high pensions would help contain spending pressures Public expenditure General government, % of GDP, 2021

18

Italy

16

Euro area

14 12 10 8 6 4 2 0

Interest payments

Education

Source: OECD National Accounts database; OECD Analytical database.

Other social

Health

Pensions

Strengthening tax compliance would raise revenues VAT compliance gap

Source: European Commission, VAT Gap Report 2023.

GRC

LTU

ITA

SVK

LVA

CZE

BEL

IRL

EU

DNK

FRA

HUN

SWE

PRT

POL

AUT

DEU

SVN

LUX

EST

ESP

FIN

20 18 16 14 12 10 8 6 4 2 0 -2

NLD

Difference between theoretical and actually collected revenue, %, 2021

Strengthening growth and employment

Reforms are needed to raise productivity Contributions to real GDP growth %, 2010-23 6 5

Labour productivity

Employment

4 3 2 1 0

-2

GRC ITA JPN FIN PRT ESP FRA AUT DEU BEL GBR NLD NOR CZE MEX CHE CAN DNK OECD SVN SWE LUX SVK USA AUS HUN LVA KOR CHL EST NZL ISL LTU COL POL CRI ISR TUR

-1

Source: OECD Economic Outlook 114 database.

The ongoing civil justice reform needs to be thoroughly implemented Expected time for a pending case to be resolved (Disposition Time) Number of days, 2021

1800 1600 1400 1200 1000 800 600 400 200 0

Note: Disposition Time (DT) is the calculated time necessary for a pending case to be resolved, considering the current pace of work. It is reached by dividing the number of pending cases at the end of a particular period by the number of resolved cases within that period, multiplied by 365. More pending than resolved cases will lead to a DT higher than 365 days (one year) and vice versa.

Source: European Commission for the Efficiency of Justice.

Pro-competition reforms are needed in services Product market regulation indicators, professional services 0-6 in ascending order of restrictiveness, 2018 4,0 3,5 3,0 2,5 2,0 1,5 1,0

0,0

CHL FIN AUS GBR CHE SWE ESP NLD MEX NZE DNK NOR LTU EST IRL COL ISR OECD POL USA CRI LVA JPN EA SVN GRC ISL PRT HUN CZE DEU FRA LUX ITA AUT BEL SVK CAN TUR KOR

0,5

Note: The preliminary 2023 Product Market Regulation data suggest that regulation of professional services in Italy remains among the most restrictive in the OECD. Source: OECD 2018 PMR database.

Expanding technical tertiary education would improve job prospects of young people Young people not in education, employment or training (NEET) % of 15-29 age group, 2021

35 30 25 20 15 10

0

NLD LUX NOR ISL SVN DEU AUS DNK BEL CHE AUT IRL GBR SWE CZE FIN EST NZL HUN CAN POL PRT LTU SVK OECD LVA FRA USA ISR ESP MEX GRC CRI ITA COL TUR

5

Source: OECD Education at a Glance database.

Expanding early childhood education would raise female labour market participation Female labour market participation rate % 70

Italy

OECD

65 60 55 50 45 40

2000

2005

Source: OECD Annual Labour Force Statistics database.

2010

2015

2020

Achieving the climate transition

Significant emissions reductions are needed to meet 2030 objectives Economy-wide greenhouse gas emissions Index, 1990=100 120 110 100 90 80 70 Actual

60

Path needed to reach goal

50 40

2016-2021 trend trend) Linear (2016-2021 1990

1995

Source: OECD Emissions Database.

2000

2005

2010

2015

2020

2025

2030

Effective emission taxes could be raised where they are low Effective carbon rates EUR per tonne of CO2, 2021 250 200 150 100 50 0

Road transport

Transport, off road

Source: OECD Effective Carbon Rates Database.

Industry

Buildings

Electricity

Authorisation procedures for renewable energy plants should be streamlined Installation of renewable energy capacity Gigawatts 7 6

Annual target

5 4 3 2 1 0

2021

2022

Note : Annual target of new renewable energy installations according to the National Energy and Climate Plan.

Source: : OECD calculations.

2023

Policies to support electrical vehicle adoption need to be strengthened Share of electric vehicles in new car registrations %, 2022 100 Battery electric cars

Plug-in electric cars (hybrid)

80 60 40

Source: European Environment Agency (EEA), European Commission - Directorate-General for Climate Action (DG CLIMA).

NOR

SWE

ISL

FIN

DNK

NLD

DEU

BEL

LUX

CHE

EU

IRL

AUT

PRT

FRA

ESP

ITA

HUN

LVA

LTU

GRC

SVN

EST

POL

CZE

0

SVK

20

Cost-efficient support schemes for the decarbonisation of buildings are needed Emission intensity in the residential sector Tonnes of CO2 per dwelling, 2021 3

2

1

0

Spain

Source: IEA Energy End-uses and Efficiency Indicators.

Italy

EU

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