Roundup: Export, investment driving better-than-expected Italian growth

by Alessandra Cardone

ROME, Dec. 15 (Xinhua) -- A recent report by Italy's main business association Confindustria predicted the country's economy would grow more than expected in 2018.

After confirming a 1.5 percent growth in 2017, the Confindustria Research Group (CSC) said that Italy's gross domestic product (GDP) would rise by 1.5 percent next year -- up from a 1.3 percent projected in September -- and then slow down to 1.2 percent in 2019.

A global expansion was providing the necessary framework for such recovery, benefiting in particular from a global investment cycle that started at the end of 2016, the report stated.

Once triggered, such a global investment cycle "would not stop in the short term, and it is likely to feed itself, generating income and demand that would justify fresh investments," it stressed.

In such a context, Italy's fresh perspectives of growth were especially driven by exports and investments, according to Confindustria CSC analysts.

"The good performance of our exports is due not only to the positive global trade trend, but also to an effective increase of our shares in foreign markets," director of Confindustria Research Center Luca Paolazzi told Xinhua.

"Italian sales abroad are indeed benefiting from the growing global demand. Yet, Italian firms are proving able not only to hook such trend, but to do even better," he added.

In fact, Italian exports were forecast to rise by 5.2 percent in 2017, 4.2 percent in 2018, and 3.7 percent in 2019. In the same period, global trade was expected to grow by 4.3 percent, 3.9 percent, and 3.6 percent, respectively, according to the report.

As such, the researchers expected Italian exports "to continue to take part in the global expansion in the next two years, and to grow at a faster pace than global trade, thanks to the high participation of Italian firms in the global value chains."

Overall, the CSC report predicted Italy's foreign trade would reach "a much higher level in 2019 than the pre-crisis highs registered in 2007."

As for investments, they would "represent (for Italy) the most vibrant element of demand" and were expected to grow by 3.4 percent in 2017, 3.3 percent in 2018 and 2.4 percent in 2019, according to the report.

More specifically, spending on machinery and transport would grow by 5.3 percent, 4.4 percent, and 2.6 percent in 2017, 2018, and 2019 respectively.

A recovery in construction investments was also confirmed, according to the report, at the pace of 1.2 percent this year, 2.0 percent in 2018, and 2.2 percent in 2019.

Paolazzi noted the current investment cycle was favored by some specific conditions.

"We have a saturation of the production capacity, for example, which is registered at global level as well as in Italy. We also see expectations for a stronger demand, and a cost of capital at historic lows," he explained.

Furthermore, the technological revolution was pushing businesses to modernize their plants in terms of digitalization. All of these factors were destined to last a long time, according to Confindustria.

Another factor would add at Italian level, represented by "the fiscal stimulus packages approved by Italian cabinets in recent years, which favor investments and technological transformation," according to Paolazzi.

A so-called "super-depreciation" regime was in fact introduced with the 2016 budget, and repeatedly confirmed until June 2019.

A further "hyper-depreciation" measure, extending incentives to firms investing in technological and digital systems fitting the Industry 4.0 model, was provided by the 2017 budget and confirmed up to Dec. 2019.

Finally, in terms of industrial production, Confindustria analysts highlighted the good performance of the manufacturing sector, both at global and at national level.

"This pace of global growth exceeding expectations is also due to the boost the manufacturing sector has started again to provide," they said in the report. "Such boost (like the global investment cycle) also tends to perpetuate itself, thanks to the impulses coming from the global value chains."

In Italy, manufacturing was "the main driver of the growth from the supply side," the report noted. "Industrial production has been recovering almost without interruption since the last quarter of 2014, growing (since then) by 7.5 percent up to the third quarter 2017," it said. Enditem