Roundup: Italy's modest recovery cyclical, more competitive workforce needed: central bank governor

Ignazio Visco, governor of the Bank of Italy said the Italian economy is continuing to show signs of a modest recovery but he warned against complacency, arguing that "cyclical" factors are fueling the upturn and that key reforms still need to be made.

Italy's economy has now shown positive growth for three consecutive quarters, following three years in which the economy contracted. For the year, forecasts are that the economy will grow between 0.8 percent and 1.1 percent.

"We see weak signs of a recovery in economic output and employment," Visco said at a conference in the Italian city of Bologna. "But we should not read into this cyclical rebound an indication that the growth problems of the economy have been resolved."

Visco pointed to key areas where Italy needs to improve, including the need to embrace digital technology. He said the economy remains uncompetitive compared to global rivals in most sectors, in part because the Italian response to cheap imports has been to slash costs rather than to innovate. That trend leads to lower productivity and competitiveness over time, Visco said.

Some of the factors helping Italy's economy are beyond the country's control: a weak euro that makes Italian exports cheaper and makes the country a more attractive tourist destination, and low fuel prices that reduce costs for production and transport. Visco also pointed to a temporary uptick demand for products that are infrequently but regularly upgraded, such as vehicles or computers.

Economists said Visco's points are valid, though they warned the Bank of Italy governor might be under-valuing some of the reforms that have already taken place, particularly labor changes that give companies more flexibility in hiring -- and firing -- workers.

"By all means, Italy must continue the reform process, but some important progress has already been made," Carlo Filippini, an economist with Milan's Bocconi University, said in an interview. Filippini pointed to reforms of the courts and schools as areas requiring reform in the near term.

Javier Noriega, chief economist with Hildebrandt and Ferrar, agreed. "Italy's education system is producing too few highly skilled workers, and the salaries companies pay are often too low to prevent skilled workers from leaving or to attract enough skilled workers from other countries," Noriega told Xinhua.

According to the International Labor Organization, only 31 percent of Italian workers are classified as "highly qualified," compared to 43 percent in the European Union as a whole. Only around half of Italy's workforce uses a computer on the job, compared to 70 to 75 percent in most industrialized countries.

Additionally, worker satisfaction -- the percentage of workers who say they are content with their jobs -- is by most measures lower in Italy than it is in the European Union (EU) as a whole, and yet the percentage of workers looking to improve their lot either through new training or by looking for a job elsewhere is near the bottom among EU states.

The 2015-2016 Global Competitiveness Report lists Italy as the 43rd most competitive country in the world, better than No. 49 a year earlier but still low by the standard of EU states. Enditem