Special Report:Global Financial Crisis
by Chinese media writer Wang Yunjia
BEIJING, March 11 (Chinese media) -- Italy, which has long
suffered from low economic growth due to lingering traditional obstacles, has
plunged into an economic downturn since the contagious financial crisis broke
out last year.
Analysts say the current downturn may last for a
considerable period in the country as it battles against traditional old
obstacles that impede its development while trying to pull through the economic
crisis.
TRADITIONAL LIMITATIONS
ON ECONOMY
Italy enjoyed vigorous growth in the mid 1990s and
became one of the first 11 eurozone countries. However, from the late 1990s it
plunged into a downturn, when most years its economic growth was behind that of
Europe's average level.
In 2005, Italy had the worst economic data in the
eurozone countries: zero growth in GDP, and the deficit jumped to 4.1 percent of
GDP. In 2006, thanks to the Torino Olympic Winter Games, it saw a rise of 1.9
percent in GDP, while Britain and Germany both increased 2.7 percent. In 2007,
Italy's GDP rose 1.5 percent, while the European Union enjoyed a 2.9 percent
increase.
Italy has faced a series of problems that have slowed
development.
First, instead of having a large number of
world-class multinational corporations like other economies of equivalent size,
Italy's main economic strength was its large base of small- and medium-size
companies, which usually suffered from high labor costs. As the developing
countries took advantage of the low cost of raw materials and labor, their
products, although sometimes blamed for poor quality, adversely affected the
local companies.
In order to cut costs and gain bigger profits, the
Italian small- and medium-size companies began to invest in East Europe and
Asia, moving their manufacturing plants there, which led to a decrease in jobs,
an increase in unemployment and a greater pressure on public spending in the
country.
Second, Italy underwent a considerable economic gap
between its northern and the southern areas. The annual average income of people
in the south was only 75 percent of that in the north in 2007. In order to boost
economic development, the Italian government kept investing in the south, which,
to their disappointment, had little effect.
Third, Italy was not good in the high-tech fields
like the bio, electronic, and information industries, which made it more
difficult to develop its high-value added industries and less competitive in the
knowledge economy.
Furthermore, analysts say, the country's huge public
debt in Europe and corruption in government also contributed to the decline of
its economy.
SEVERE CHALLENGES AHEAD
As the financial crisis swept the world, Italy could
not escape. It entered a recession -- defined as two quarters of negative growth
in a row -- in the third quarter of last year.
Italy suffered a 1 percent GDP contraction in 2008,
which was worse than the 0.6 percent contraction the government had predicted,
and the worst since 1975, the Italian Statistics Agency(Istat) said last week.
The contraction was largely due to a 3.7 percent fall
in exports, a three percent fall in investment and a 0.5 percent fall in
consumption.
The record one-percent GDP drop in 2008 has boosted
the country's budget deficit and lowered its primary surplus, Istat said.
The country's deficit for 2008 is expected to rise to
2.7 percent of GDP, from 2.6 percent forecast by the government. Meanwhile, its
primary surplus declined to 2.5 percent of GDP in 2008, from 3.5 percent in
2007, Istat said.
Amid the economic crisis, Italians have had to change
their lifestyles. According to a report "Italy 2009" by think tank Eurispes,
today 78 percent of Italians have changed their lifestyles, cutting expenditure
on such things as gifts, restaurants, entertainment and holidays.
Some people thought that for Italy, the crisis may
not be as destructive as it would be for other nations.
"You'll see that we are raising our position in this
crisis, as other nations are going backwards faster," Italian Economy Minister
Giulio Tremonti said in January.
However, as the "traditional" obstacles still exist,
which could bring a worse impact to the country with the current international
financial crisis, the outlook seems more bleak and obscure to some observers.
On Tuesday, the Organization for Economic Cooperation
and Development (OECD) said the situation in Italy this year and the next would
be "much worse" than it had previously forecasted, and the economic data this
year may be the steepest among its 30 members.
Italy would not come out of its current recession
until "sometime" in 2010, the OECD said.
The International Monetary Fund also agreed that
Italy faced a difficult time. In its country report released earlier this year,
the IMF said the possibility of Italy's economic recession stretching into 2010
"cannot be ruled out."
"In line with the rest of the euro area, Italy is
being severely affected by the worsening economic environment", the IMF said.
"The economic recession is deepening, and, while a
gradual recovery is expected in 2010, the possibility of a prolonged downturn
cannot be ruled out," it said.
Bank of Italy's deputy director General Ignazio Visco
said on Wednesday that Italy's GDP in 2009 may fall by as much as 2.6 percent, a
figure much worse than that of 1975.
The Italian government has taken several measures to
tackle the economic crisis.
The government's economic committee CIPE on Friday
approved a program of public projects to help the country weather the global
downturn.
Aimed at boosting the economy and creating jobs, the
plan involves some 17.8 billion euros (23.1 billion dollars), more than the
originally expected 16.6 billion (21.6 billion dollars), which would be mainly
invested in infrastructures.
The government has also helped families pay their
mortgages and buy durable goods.
Although the Italian banks so far do not seem to have
been directly hit by the credit crunch, which began in September 2007 and then
worsened in the second half of 2008, the government is debating whether to
nationalize the country's banks in case of emergency.
In the meantime, facing the most difficult financial
crisis in the new century that has affected nearly every part of the world,
Italy still has a long way to find solutions to tackle its traditional
problems.
Posts
No comments:
Post a Comment