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The Economy of Italy
Name: Hussain Aljanoubi
ID: 200801603
Name: Murtada Almaqrodh ID: 201001381
Macroeconomics
A short history on the economic background of the Italy:
Italy, rich in art, cuisine and ancient history, went from being the “sick man of Europe’' to its
third largest economy, only to see its future imperiled by stagnant growth, political paralysis and
investor fears over the mountain of debt it has piled up over the years. In a sense its economic
troubles date back to the late 1990s, when the country’s manufacturing was overtaken by
competitors in Asia. Its patronage-based politics and rule-bound labor practices changed little,
but a flood of cheap money that followed the introduction of the euro helped keep the system
going. Then came the global financial crisis of 2008, which shrank Italy’s economy by more than
6 percent. Growth resumed in 2010, but was snuffed out in 2011 by the rising debt crisis, and the
International Monetary Fund predicts “another decade of stagnation.” At roughly 120 percent of
G.D.P., its growth-hobbling government debt is second only to Greece’s among euro zone
members. Although it has run a budget surplus, minus debt costs, for several years, the Italian
government spends about 16 percent of that budget on interest payments — a bill that began to
rise in the summer of 2011 as investors and creditors began to fear that Italy cannot escape
Europe’s debt crisis.
Demographics:
The population of Italy has been growing at a steady rate of 0.38% over the past few years. In
2002, the population was about 57.1 million, and it grew up to about 60.77 million by 2011. Of
that total population, 48% are male, and 52% are female, which gives the ratio of 0.93 male/
female.
The age of Italy’s population is distributed as 13.8% bellow 15 years, 65.9% between 15 and 64,
and the remaining 20.3% above 65, with the average age being 43.5 years. The life expectancy of
Italians is 81.86 years.
The death rate, which is 0.993% as estimated in 2011, is a little higher than the birth rate, which
is estimated to be 0.906% in 2011. However, the population is still growing because of migration
rate of 0.467% which sets off the difference between death and birth rates.
The official language of Italy is Italian. There are other languages spoken at some parts of the
country, such as German, French, and Slovene.
The main followed religion in Italy is Christianity, which accounts for about 80% of population,
followed by Atheists and Agnostics, which make about 20% of the population. The Muslims in
Italy are a small group that of about 700,000 which is about 1% of the population.
Gross Domestic Product (GDP):
In this section I will talk about the GDP trend for the past 10 years for Italy and I will explain
why there was an expansion or contraction. Italy has a diversified industrial economy with high
gross domestic product (GDP) per capita and developed infrastructure, according to the
International Monetary Fund, the World Bank and The World Fact book.
Italian general GDP
Italy has a diversified industrial economy with approximately the same total and per capita
output as France and the UK. This capitalistic economy remains divided into a developed
industrial north, dominated by private companies, and a less developed agricultural south, with
more than 20% unemployment. Most raw materials needed by industry and more than 75% of
energy requirements are imported. For several years Italy has adopted budgets compliant with
the requirements of the European Monetary Union (EMU); representatives of government, labor,
and employers also agreed to an update of the 1993 "social pact," which has been widely credited
with having brought Italy's inflation into conformity with EMU requirements. Italy must work to
stimulate employment, promote wage flexibility, hold down the growth in pensions, and tackle
the informal economy. Growth was 1.3% in 1999 and should edge up by 2.6% in 2000, led by
investment and exports. In 2003 the GDP of Italy is going down by 0.0% because the oil price is
go down and increasing in the inflation. In 2004 the GDP start to do up by 1.7% because they
produce and export more oil. In 2007 the GDP for Italy start going dawn because the economic
crises the oil pries so Italy reduce productivity that way the GDP is go dawn. In 2008 the GDP
steal affected by the economic crises. The GDP in 2009 was decrease by -5.1% after that in
2010 the GDP goes up by1.5% because Italy has improved the low of economics and the oil
prices also is go up also the government spend more in the Social services and health sectors.
Unemployment rate in Italy:
The unemployment rate in Italy, reported at 11.1%, experienced an increase of 0.3 percentage
points when compared to September and of 2.3 points in comparison with October of 2011. The
number of unemployed amounted to 2.87 million persons, an increase of 3.3% when compared
to September 2012 (+93 thousand persons). The growth of unemployment affects equally men
and women. The number of employed persons in October remained virtuallly unchanged from
last month and recorded a drop of 0.2% in comparison with the same month last year. The
employment rate was reported at 56.9%, an increase of 0.1 percentage points in comparison
with October 2011.
Persons aged 15-24 years looking for job are 639 thousand, representing 10.6% of the
population in this age group. The unemployment rate for 15-24 years old, which is the ratio of
unemployed to the total of those employed or looking, is equal to 36.5%, up 0.6 percentage
points from the previous month and 5.8 points in comparison trend. The number of inactive
individuals aged 15-64 years decreased by 0.7% compared to the previous month (-95 thousand
persons). The inactivity rate stood at 36.0%, down 0.2 percentage points compared with
September’s 1.5 percentage points on year.
Currency and Exchange Rate:
The currency of Italy was the Lira until it was replaced, in 1999, by the Euro. The Euro is
currently the official currency of the Euro zone, which is made up of 17 of the 27 states of the
European Union. This currency share means that all Euro zone countries are affected by
economic fluctuations in the zone.
Between 2002 and 2012, the Euro has been generally increasing in value. It reached its peak in
2008, when it valued $1.6/Euro. After that, its value decreased a little, and averaged around
$1.3/Euro.
Typically, an increasing exchange rate would cause an increase in imports and a decrease in
exports. In the case of Italy, we notice an increase in exports despite the increase in exchange
rate. This is due to fact that most of Italy’s trade is made within the Euro zone, which is about
59% of exports. This trade between Euro zone countries is not affected by currency, because all
those countries share the same currency and can easily and freely trade with each other.
Government Expenditure:
From the graph above, we can see a gap between government revenue and spending. The graph
shows that the government has always been spending more than the money it is making, which
means the government has been borrowing money to do that. Government revenue at 2003 was
596.20 billion Euros and spending was 645.12 billion Euros. In 2011, revenue was 728.88
billion Euros and spending was 788.74 billion Euros. Because of this spending pattern, the
government of Italy has accumulated a huge debt of 2 trillion Euros, while the GDP is about
1.66 trillion Euros which is about 120% of total GDP. To fix that problem, the government of
Italy is planning to reduce spending over the coming years.
The government of Italy spends about 5.1% of GDP on health, followed by 4.3% on education.
It also spends about 1.8% of GDP on the military.
Refrains:
http://www.tradingeconomics.com
http://en.wikipedia.org/wiki/Economy_of_Italy
http://www.gfmag.com/gdp-data-country-reports/249-italy-gdp-country-report.html
http://www.indexmundi.com