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Italy Shows Signs of Recovery
World Economy

Italy Shows Signs of Recovery

If there is any hope for the ailing Italian economy, it may lie within the white hallways of a midsized pharmaceutical manufacturing plant near Latina, 50 miles south of Rome.
Last year Janssen, a unit of Johnson & Johnson, invested €500,000 in a new machine capable of producing up to 70,000 capsules an hour, compared with 17,000 using older machinery. The equipment is being used to churn out Olysio, a new hepatitis C medicine, to meet demand in Italy and abroad, NewsNow reported.
Janssen’s decision to renew its equipment could be a sign of wider change. After more than six years of economic stagnation and recession that forced companies to put the brakes on capital spending plans, confidence is growing that Italian investment may be on the cusp of a revival.
“We’re a grand example,” says Massimo Scaccabarozzi, president of Janssen Italy and Farmindustria, Italy’s top pharmaceutical lobby group. “This is a very important sign of recovery and it should give a sense of stability to this country.”

  Investment
Any rebound in investment in Italy this year would come from a depressed starting point. Italian gross fixed capital formation (a common measure of investment) is close to its lowest levels in nearly two decades, though it increased very slightly, by 0.2 per cent, in the fourth quarter last year.
Investment levels are also worse in Italy than in most of its peers. According to a Eurostat analysis, they fell from a base of 100 in 2010 to 81 in 2014, while they remained flat in France and increased in Germany, the UK and the US over the same period of time.
But there is widespread hope that things are changing. Plunging oil prices have shrunk energy expenses, while the launch of quantitative easing by the European Central Bank has led to a fall in the euro, boosting exporters and promising to keep borrowing costs low for some time.
In 2015, economists expect Italy to post growth in gross domestic product — of at least 0.5 per cent — for the first time in three years. And Italian business confidence, a leading indicator for new investments, hit its highest level in seven years in March.
“The situation of companies is improving,” says Paolo Mameli, a senior economist at Intesa Sanpaolo. “This is not a false signal. This time we are at a turning point.” Still, there is plenty of nervousness that, as in the past, a bump in confidence will fail to translate into concrete investment plans — especially since the Italian economy remains riddled with structural deficiencies, from a byzantine justice system to high levels of corruption.

 

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