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GDP (2002): $1.2 trillion.
Per capita income (2002): $21,500.
GDP growth: 0.9% (2003 est.); 0.4% (2002); 1.8% (2001).
Natural resources: Fish, natural gas.
Agriculture: Products--wheat, rice, grapes, olives, citrus fruits. Industry: Types--automobiles, machinery, chemicals, textiles, shoes.
Trade (2002): Exports--$263.6 billion. Partners--EU 53%, U.S. 10%, OPEC 4%; mechanical products, textiles and apparel, transportation equipment, metal products, chemical products, food and agricultural products. Imports--$254.5 billion. Partners--EU 56%, OPEC 6%, U.S. 5%; machinery and transport equipment, foodstuffs, ferrous and nonferrous metals, wool, cotton, energy products.
Economy of Italy
The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial state ranked as the world's fifth-largest industrial economy. Italy belongs to the Group of Eight (G-8) industrialized nations; it is a member of the European Union and the Organization for Economic Cooperation and Development (OECD).
Italy has few natural resources. With much of the land unsuited for farming, it is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore Adriatic, have grown in recent years and constitute the country's most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country's energy sources are imported. Italy's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. Its major industries are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, and fashion and clothing.
Italy is in the midst of a slow economic recovery and is gradually catching up to its west European neighbors. In the aftermath of September 11, 2001 and the global economy's tailspin, Italy--like the rest of the EU--saw its economy stumble. Fourth quarter 2001 results showed zero or negative GDP growth. As a result, Italy's economy decelerated from 2.9% in 2000 to 1.8% in 2001. Average euro-zone growth in 2001 was 1.4%.
In the post-September 11 period, imports decelerated faster than exports, producing an $8.5 billion surplus in 2001, up from the modest 1.8 billion surplus in 2000. With respect to inflation, Italy is now firmly within norms specified for Economic and Monetary Union (EMU), a major achievement for this historically inflation-prone country. Consumer inflation accelerated from 2.5% in 2000 to 2.8% in 2001. The 1992 agreement on wage adjustments, which has helped keep wage pressures on inflation low, remains in effect. Tight monetary policy by the Bank of Italy also has helped bring inflation expectations down. GDP growth decreased from 2001 to 2002 from 1.8% to 0.4%. In 2002 GDP grew by a margin of 0.4% and was expected to increase 0.9% in 2003, and by 1.8% in 2004, supported by a modest recovery in economic demand.
Since 1992, economic policy in Italy has focused primarily on reducing government budget deficits and reining in the national debt. Successive Italian governments have adopted annual austerity budgets with cutbacks in spending, as well as new revenue raising measures. Italy has enjoyed a primary budget surplus, net of interest payments, for the last 7 years. The deficit in public administration declined to 1.4% of GDP in 2001, down from 1.7% in 2000. Italy joined the European Monetary Union in May 1998. The national debt, which stood at roughly 124% of GDP in 1995, declined from 110.6% in 2000 to 109.4% in 2001, as it steadily falls toward the EU-imposed debt/GDP ratio of 60% of GDP. The last balance-of-payments data show a current account deficit of 7.3 billion euro in 2002. In light of the stability pact, the EU has been closely watching the national deficit situation in Italy.
Italy's closest trade ties are with the other countries of the European Union, with whom it conducts about 54.4% of its total trade (2002 data). Italy's largest EU trade partners, in order of market share, are Germany (15.5%), France (11.6%), and the United Kingdom (5.9%).
U.S.-Italy Economic Relations
The U.S.-Italian bilateral economic relationship is strong and growing. The United States and Italy cooperate closely on major economic issues, including within the G-8. With a large population and a high per capita income, Italy is one of the United States' most important trade partners. In 2002 the United States was the fifth-largest foreign supplier of the Italian market and the largest supplier outside the European Union. Total trade between the United States and Italy was $34.4 billion in 2002. The U.S. ran a $14.2 billion deficit with Italy in 2002.
Significant changes are occurring in the composition of this trade. More value-added products such as office machinery and aircraft are becoming the principal U.S. exports to Italy. The change reveals the growing sophistication of the Italian market, and bilateral trade should expand further. In 2002 the United States imported about $24.3 billion in Italian goods while exporting about $10.1 billion in U.S. goods to Italy. U.S. foreign direct investment in Italy at the end of 2001 exceeded $23.9 billion.
Unemployment is a regional issue in Italy--low in the north, high in the south. The overall national rate is at its lowest level since 1992. Chronic problems of inadequate infrastructure, corruption, and organized crime act as disincentives to investment and job creation in the south. A significant underground economy absorbs substantial numbers of people, but they work for low wages and without standard social benefits and protections. Women and youth have significantly higher rates of unemployment than do men.
Unions claim to represent 40% of the work force. Most Italian unions are grouped in four major confederations: the General Italian Confederation of Labor (CGIL), the Italian Confederation of Workers' Unions (CISL), the Italian Union of Labor (UIL), and the General Union of Labor (UGL), which together claim 35% of the work force. These confederations formerly were associated with important political parties or currents, but they have evolved info fully autonomous, professional bodies. The CGIL, CISL, and UIL are affiliated with the International Confederation of Free Trade Unions (ICFTU) and customarily coordinate their positions before confronting management or lobbying the government. The confederations have had an important consultative role on national social and economic issues. Among their major agreements are a 4-year wage moderation agreement signed in 1993, a reform of the pension system in 1995, and an employment pact, introducing steps for labor market flexibility in economically depressed areas, in 1996. In April 2002, unions held a general strike to protest against labor reforms proposed by Prime Minister Berlusconi.
Italy's agriculture is typical of the division between the agricultures of the northern and southern countries of the European Union. The northern part of Italy produces primarily grains, sugarbeets, soybeans, meat, and dairy products, while the south specializes in producing fruits, vegetables, olive oil, wine, and durum wheat. Even though much of its mountainous terrain is unsuitable for farming, Italy has a large work force (1.4 million) employed in farming. Most farms are small, with the average farm only seven hectares.