Country Forecast Italy

  • ID: 2138624
  • April 2016
  • Region: Italy
  • 49 Pages
  • The Economist Intelligence Unit
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Background: Post-war Italy has been characterised by a weak political structure and a relatively strong, but recently declining, economic base. Between 1996 and 2011 Italy had a bipolar political system, dominated by a centre-right alliance and a centre-left coalition. Since 2011 the political landscape has become more fragmented, with the break-up of the centre right and the emergence of Movimento 5 Stelle (M5S), a protest movement. Since the general election in 2013 Italy has had two broad centre-left/centre-right governments. The current government, led by Matteo Renzi, took office in February 2014.

Political structure: Parliament is elected for a maximum of five years. The president, who is elected by parliament for a seven-year term, decides, in the event of a political crisis, whether to call an election or to nominate a prime minister to try to form a government. He also promulgates laws and may return a law to parliament for reconsideration, but he has no power of veto. Executive power lies with the cabinet, which is nominated by the prime minister and approved by parliament. The prime minister cannot dismiss ministers without forming a new government. An electoral reform READ MORE >

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Country Forecast Italy

Italy--highlights: Political outlook

Italy--highlights: Demographic outlook

Italy--highlights: Business environment outlook

Italy--highlights: Economic outlook

Italy--highlights: Market opportunities

Italy--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability
Approval of constitutional reform is likely, making way for elections in 2017

Political outlook: Political and institutional effectiveness
Efficiency may improve in the public administration, but not in the judiciary

Political outlook: Election watch

Political outlook: Key players to watch
Matteo Renzi
Sergio Mattarella
Beppe Grillo
Silvio Berlusconi
Matteo Salvini

Political outlook: International relations

Demographic assumptions
Population growth is projected to come to a virtual halt
Reforms should help to increase labour mobility
Rise in proportion of elderly will put pressure on pensions and healthcare

Business environment outlook: Business environment rankings
Political reforms could greatly improve government effectiveness

Business environment outlook: Italy's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
The labour market

Business environment outlook: Macroeconomic environment
The budget deficit will remain under control, but debt reduction will be slow

Business environment outlook: Policy towards private enterprise and competi
External constraints will continue to be the main drivers of liberalisation
Market conditions are likely to determine the pace of privatisation

Business environment outlook: Policy towards foreign investment
The positive impact of economic reforms will only be felt incrementally

Business environment outlook: Foreign trade and exchange controls
The EU will lag behind progress made in other regional trade agreements

Business environment outlook: Taxes
Italy's tax system remains highly complex so compliance is costly
Despite plans to reduce levies in 2016-18, labour taxes will remain high
Efforts to reduce tax evasion have had some success and are likely to continue

Business environment outlook: Financing
Effectiveness of action to tackle NPLs remains uncertain

Business environment outlook: The labour market
The positive impact of the Jobs Act is likely to felt over the medium term

Business environment outlook: Infrastructure
Infrastructure quality in the south will continue to lag the rest of the country
Fiscal consolidation will hold back public investment in infrastructure

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy

Economic forecast: International assumptions

Economic forecast: Economic growth

Economic forecast: Sectoral trends
Italian industry faces major challenges owing to structural deficiencies
Manufacturing sector performance will depend on the speed of the reforms
Construction sector activity is likely to remain subdued in 2016-20

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector

Economic forecast: Foreign direct investment in Italy
Stocks and flows
Origin and distribution

Market opportunities: Market outlook
Italy is a major market, but growth potential remains limited

Market opportunities: Consumer expenditure
The ageing population will drive growth in healthcare spending

Market opportunities: Social indicators and living standards

Long-term outlook: The long-term outlook
Italy's demographic profile will be the main brake on long-term growth
A more favourable policy environment would boost long-term growth

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data sources and definitions
Global data
Domestic data

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model

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