Italy’s Strong Exports Underpin Upward Adjustments

If Italy’s economy really is on the mend, analysts said it is the export sector doing most of the work.

This year has seen signs that Italy’s weak economy may finally be on the mend after a decade of slow growth punctuated by occasional spurts of activity, livetradingnews.com reported.

But so far, 2017 has seen at least a dozen upward adjustments in growth forecasts from the Italian government, ratings agencies, and multilateral organizations.

The Italian Ministry of Finance, predicts the economy will grow 1.5% this year, up from 1.1% predicted in April, and 0.9% at the start of 2017. Economists now say the stronger growth is expected to extend into 2018 and 2019.

Export growth is the main driver behind the trend. The ministry figures predict exports will grow 4.8% this year compared to 2016, far more than the 3.7% rate predicted six months ago, and models from SACE, the Italian export credit agency, predict Italian exports will grow at a healthy 4.5%-per-year clip through at least 2020.

“Exports have almost always been one of the main drivers behind Italy’s economic growth and that will certainly be true over the next several years,” economist Beniamino Quintieri, SACE’s chairman said. According to information from SACE and statistics office ISTAT, Italian exports accounted for 25% of Italy’s GDP in 2010. That number rose to 30.4% last year, and SACE’s models predict it to rise further, to 32.4% in 2020.

Analysts said the main factor behind the trend is the maturity of Italian companies, especially the medium-sized players that dominate the economy.

In the 1970’s, 1980’s, and 1990’s, Italian companies were helped every time the government devalued the lira, Italy’s currency. Those companies struggled after the value of the lira was fixed to other European currencies in 1998 in preparation for the launch of euro in January 1999 and introduction of the euro notes and coins in January 2002.

“The companies that managed to survive during that period, or that have emerged since then are very competitive,” Stefania Tomasini, chief economist with Prometeia, an Italian consulting firm. “Overall, Italy’s export sector is still 25% smaller than it was before the economic crisis that started a decade ago, but on a company-by-company basis Italian firms can now compare favorably to their counterparts in Germany and France.”

Tomasini said improvements in the manufacturing process, better sales networks, healthier balance sheets, the use of cutting-edge technology, and the ability for companies to react quicker to changes in markets have combined to result in highly competitive industries.