5 charts that explain big challenges facing Italy’s new government

From left to right: Mr Giuseppe CONTE, Italian Prime Minister; Mr Donald TUSK, President of the European Council. Shoot location: Rome – ITALY. Shoot date: 20/06/2018. Copyright: European Union

This article is brought to you thanks to the strategic cooperation of The European Sting with the World Economic Forum.

Author: Emma Charlton, Writer

Earlier this month, Giuseppe Conte – a law professor with little political experience – was sworn in as Italy’s prime minister. During the hard-fought election and political turmoil that preceded his appointment, the economy became a key battleground.

As the new coalition government settles in, these charts illustrate just a few of the economic challenges it faces.

Anemic growth

Despite emerging from recession, growth remains sluggish and Italy still lags behind its European peers. The OECD projects growth will slow from 1.6% to 1.4% this year and 1.1% in 2019.

Debt fears

Debt levels are worryingly high. As a percentage of gross domestic product, Italy’s government borrowings are the second highest in the eurozone, after Greece.

Investors are concerned about the prospect of a debt crisis in the eurozone’s third-largest economy. And the power struggle in the months after the March election between anti-establishment populist parties and tensions over Italy’s use of the euro triggered further anxiety in global financial markets.

Competitiveness

Italy ranks 43 out of 137 in the latest World Economic Forum Global Competitiveness Index, behind other southern eurozone countries Spain and Portugal.

This chart shows factors that executives identified as barriers to doing business in Italy. Problem areas identified include bureaucracy, tax rates and labour laws.

Italy’s overall score showed scope for improvement in wage policies and attracting and retaining talent. In the financial realm, a lack of access to loans and funding, as well as concerns about the soundness of banks were key themes.

Innovation

The nation also lagged behind its peers in a Global Competitiveness Index measure that tracks how countries have performed over the last decade in innovation. This metric includes capacity for innovation, the quality of scientific research and company spending on research and development.

This is particularly troubling, as the Forum report noted that the pace and disruptiveness of technological change is creating unprecedented opportunities and challenges for every country.

“These emerging technologies have immense potential to be a source of growth, but their future evolution is uncertain,” the report said. “A key challenge is how to unlock their potential in a way that benefits society as a whole given that they can profoundly reshape the national and global distributions of income and opportunities.”

Prepared for disruption?

In a separate measure: “technological readiness” – how well economies are prepared for future advances – Italy has improved recently, but remains some way behind Germany, the UK and France.