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invest ing and doing business in i taly


and its budget deficit was reduced to 4.6% of GDP. Istat also recently reported that Italy's economic expansion during the last year was prompted by the industrial sector growing by 4.8%, the service sector by 1% and a 3.4% contraction in the construction industry. Using Bank of Italy data, Istat’s recent report also showed that Italy's public debt increased to 119% of GDP at the end of 2010, as well as the fact that household spending in 2010 rose by 1% while overall spending by the public administration contracted by 0.6% in 2010 from the previous year. In addition, gross fixed investments increased by 2.5% while exports increased by 9.1%, Istat reported. In 2010 as a whole, real GDP expanded by 1.1%.


Quarter-on-quarter GDP growth reached around 0.5% in each of the first two quarters, then eased to 0.3% in the third and decreased further to 0.1% in the final quarter.


2011 Outlook for the Italian Economy The economic recovery is expected to continue steadily during 2011, with exports still providing the catalyst for growth. Investment is expected to increase moderately, although capacity utilisation remains at a low level, making it tricky for new investment plans. Taking an overall look at GDP in the year ahead, levels are expected to grow at the same rate as in 2010 (1.1%), taking Italy further into a brighter economic future.


Employment Mirroring the plight of countries all over the world since the onset of the global recession, Italy has dealt with its fair share of unemployment troubles. According to Istat, the number of Italians in


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employment decreased by 1% during the third quarter of 2010 compared to the third quarter of 2009. The issue of unemployment is somewhat divided according to area in Italy, with statistics tending to reach higher levels in the south and lower in the north, adding further to the cultural and economic divide that is already apparent in Italy. The south suffers from problems such as


inadequate infrastructure, corruption, and organized crime which can dissuade investment and job creation. In addition, a substantial portion of the population finds itself part of a significant underground economy, however the wages are low and standard social benefits and protections are practically non-existent. In addition, the male portion of the Italian population tends to fare better in the unemployment statistics than the female section. In addition, the percentage of young people unemployed in Italy is significantly higher than the older residents.


Employment Outlook Although, according to Bloomberg, unemployment levels during the final three months of last year decreased from 8.4% to 8.3%, the outlook for 2011 is uncertain. Employers’ lobby, Confindustria, predicted in a report at the end of last year that unemployment levels may rise to 9% by the end of 2011. This is a plight which will not be helped by several high profile Italian companies such as airline Alitalia SpA and Italy’s biggest home-appliance manufacturer Indesit SpA creating changes within their firms which will no doubt lead to job loss. Alitalia is reported to be looking to cut 400 jobs by outsourcing to other airports, whilst Indesit reportedly announced in December 2010 that it is looking to close some of its plants, and whilst every care will surely be taken to ensure minimum job loss, it cannot be ruled out, as with any organisational restructure.


Finance and Tax Financial issues are never far away from the minds of those in the business world, and never more so than during times such as the world has experienced during the last two or three years. Italy’s corporate financial structure is not hugely complicated, and buying property or setting up a business in Italy is relatively straightforward. Although, due to the complexity of the legal system, proceedings run the risk of becoming very complicated if proper legal advice is not sought. The issue of tax in Italy is currently perhaps more in


the spotlight than usual due to Italian Prime Minister, Silvio Berlusconi’s recent high profile trial for tax fraud charges after having been stripped of his immunity from prosecution. However, less dramatic issues surrounding tax in Italy are equally as important, especially for those considering investing, buying or working in the country. Currently, the standard rate


fi MONTHLY MARCH 2011


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