The economic contraction was severe
The government responded swiftly to the COVID-19 crisis
Faster growth is needed to improve the debt-to-GDP ratio
More physical and social capital is key to raise growth
Pension and debt costs leave little space for pro-growth and inclusive spending
Improving vaccination rollout has allowed a gradual easing of activity restrictions
The high share of severely restricted sectors amplified economic contraction
COVID impact has been broad – but the most vulnerable have suffered more
Italy has relied heavily on short-time work schemes and made provision for generous loan facilities
Exports by main destinations and main goods
Confidence has recovered, and investment is expected to lead the rebound
Swift policy responses have been a vital lifeline for access to finance given low cash holdings
Vulnerabilities remain in the banking sector
Non performing and bad loans have been progressively reduced
Public debt levels have risen sharply and will remain elevated
Spending on pensions is set to rise from already high levels – even with reforms
Older Italians are relatively well off compared to counterparts in Europe
Putting public debt on a downward path requires additional structural reforms
Per capita income has stagnated
Sluggish investment and productivity have weighed on growth
Investment dominates spending plans
There is room to improve utilisation of EU investment funds
Investment has recovered slowly from the global financial crisis and lags peers
Investments rose fastest in manufacturing sectors and intellectual property assets
R&D spending is particularly low by the government and higher education institutions
Non-financial corporates have reduced leverage but are still vulnerable
The generosity of ACE reduces the debt bias
Italy has progressed in reducing carbon emissions
Transport, electricity and domestic heating are the main sources of greenhouse gas emissions
Carbon pricing is not yet widely applied and exposure to particulate emissions remains high
Uncertainty about regulations and taxes is a major obstacle to green investment
Regulations can be better designed to achieve objectives
Figure 1.28. Italy’s productivity growth has lagged its peers for the last two decades
A recovery in manufacturing productivity, but services sector productivity lags
Firms’ entry and exit rates lag other countries
Product market regulation in Italy’s services sector lags other areas
Professional services restrictions are very high
Access to high-speed broadband is low
There is scope to increase the use of government e-services
Low recovery rates can stymie firm creation and raise the costs of recessions
Italy’s justice system in practice reduces the efficacy of its property rights framework
Perceptions of corruption are still high compared to other OECD countries
Italy has been effective in fighting money laundering
Access to employment is deeply unequal and unemployment is persistent
Workers benefiting from Italy’s recent reforms now face income tax wedges near the EU average
Spending on ALMPs has risen, but high unemployment and skills gaps require more
Firms are not providing their employees enough digital training
Italy’s tax mix has low reliance on VAT and a higher reliance on social security contributions than peer countries
Inheritance tax thresholds are low compared to OECD peers and average bequests
The marginal effective rates of property
Perceptions of the public sector’s effectiveness lag behind other OECD countries
Italy’s pension and debt servicing costs are higher than in most other OECD countries, while growth-enhancing spending is lower
Outcomes from Italy’s public spending lag behind in some areas, such as building skills and reducing poverty rates among children and families
Italy has developed a large number of performance indicators, but they have little influence on what public goods and services the budget funds
Italy has substantially improved how it designs regulations, but still regulates some sectors heavily
Italy’s public sector workforce has been reduced to among the smaller across the OECD
Italy’s ageing public workforce will soon bring a loss of experience and an opportunity for renewal
Public service pay rates are compressed, with low skill and the top echelon of public servants earning relatively high wages
Smaller municipalities have thinner procurement capacity and use direct purchasing more often
Italy has made significant progress in transforming public services through digital technologies and data, but take-up lags
Local authorities that digitalise are more effective, but most only digitalise when compelled
Italy has room to shift resources to active labour market policies with a greater focus on serving jobseekers
Italy is moderately decentralised, and subnational governments have an important role delivering public investment
Most of Italy’s 7900 municipalities are small
Improving the efficiency of childcare services would help raise access
Larger municipalities execute a lower share of their public investment projects
Public enterprises play a large role in Italy, and their governance can be improved
Most public enterprises are held by local governments and many have few employees