Transcript the presentation

OECD ECONOMIC SURVEY
OF ITALY 2017
Reforms are paying off,
but challenges remain
15 February 2017, Rome
http://www.oecd.org/eco/surveys/economic-survey-italy.htm
@OECDeconomy
@OECD
Overview: Boosting Inclusive Growth in Italy
 Structural reforms are starting to pay off:
o Italy has made remarkable progress on structural reforms
o This has helped Italy to emerge from a deep and long
recession
 Current challenges:
o Slow productivity and investment growth; banks’ nonperforming loans are a burden
o More jobs are needed as well as better skills
o Poverty among young and children should be brought down
The economy is finally recovering after
a deep and long recession
GDP growth, annual % change
4
GDP growth, annual % change
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
-6
2005
2007
2009
2011
2013
2015
Source: OECD Economic Outlook 100 Database, projections revised as of 20 January 2017
2017
-6
Reforms have boosted hirings
New hirings, millions
14
12
Other new hirings
New hirings on permanent contracts
10
Jobs Act
enacted in
early-2015
8
6
4
2
0
Jan-2013/Nov-2014
Jan-2015/Nov-2016
Source: Istituto nazionale della previdenza sociale (INPS) Osservatorio sul Precariato.
Higher employment has increased
private consumption and growth
Y-o-Y % changes
Total fixed investment
Private consumption
8
4
0
-4
-8
-12
2000
2002
2004
2006
Source: OECD Economic Outlook 100 Database
2008
2010
2012
2014
2016
Fiscal policy is supporting growth
Cyclically adjusted government net lending, % potential GDP
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
-4.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: OECD Economic Outlook 100 Database, updated on 20 January, 2017.
2016
2017
2018
Banks’ non-performing loans are high
%
40
Non-performing loans to total gross loans
2016Q2 or latest available
%
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
EST GBR NLD AUT DNK BEL
Source: IMF Financial Soundness Indicators.
LVA
FRA SVK ESP SVN PRT
IRL
ITA
GRC
0
Good progress on structural reforms
Reforms approved
Jobs Act
Ongoing reforms
Reforms to do
Tax evasion and
compliance
Lowering cash payment
thresholds
Public administration
Permanent cut in social
security contributions
Youth Guarantee
Spending reviews
Competition law
Budget making process
Public procurement code
Anti-corruption (ANAC)
Source: OECD compilation.
National anti-Poverty
programme
Real estate tax based on
updated cadastral values
Re-launching infrastructure
Job-search and training spending
policies
Broad reform of insolvency
Buona Scuola
procedures
Industry 4.0 Plan
National anti-poverty
programme
First challenge:
Boosting growth and
reducing banks’ bad debts
Productivity is low but
is starting to recover
Annual % change
3.0
Total factor productivity
Annual % change
3.0
Labour productivity (trend)
Capital deepening
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
Source: OECD Economic Outlook 100 Database, projections revised as of 20 January 2017.
2014
2017
Public debt has stabilised but remains high
% of GDP
135
130
125
120
115
110
Note: For more details see Economic Survey of Italy, 2017
Source: OECD Analytical database and OECD calculations.
2018
2016
2014
2012
2010
2008
2006
2004
2002
100
2000
105
Stronger growth will help reduce public debt
Debt to GDP ratio, %
140
Higher interest rate (+1.4% points)
Debt to GDP ratio, %
140
130
130
Baseline
120
120
Higher GDP growth (+0.5%)
110
110
100
100
90
90
80
2000
02
04
06
08
10
12
14
16
18
20
22
24
26
28
30
80
Note: The baseline scenario considers the projections for the Economic Outlook No. 100 until 2018 and thereafter assuming
yearly real GDP growth of 1%, primary surplus of 1.5% of GDP, effective interest rate of 3.2% and inflation of GDP deflator rising
progressively to 1.5% by 2024 and remaining constant after.
Source: Calculations based on OECD Economic Outlook: Statistics and Projections (database).
Prioritise spending on
effective infrastructure programmes
% of GDP
Government fixed capital
5.0
Italy
4.5
France
Germany
United States
% of GDP
5.0
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
2000
02
04
06
08
10
Source: OECD Analytical Database; and OECD, National accounts database.
12
14
16
Tax collection remains low
VAT revenue ratio, 2014
1.2
VAT revenue ratio, 2014
1.2
1.0
0.8
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0.0
0.0
MEX
ITA
GRC
ESP
TUR
POL
GBR
ISL
BEL
FRA
NLD
SVK
PRT
CAN
IRL
AUS
LVA
FIN
DEU
OECD
NOR
HUN
SWE
CZE
AUT
DNK
SVN
CHL
ISR
KOR
EST
JPN
CHE
NZL
LUX
1.0
Note: The VAT revenue ratio is the ratio of actual VAT collection to revenue that would be collected if VAT was
applied at the standard rate to the entire potential tax base and all revenue was collected.
Source: OECD Consumption Tax Trends 2016: VAT/GST and excise rates, trends and policy issues.
Lowering social security contributions will
boost job creation
Average social security contribution (SSC) rate
%
60
%
60
50
Average rate of employees' SSC
ITA
Average rate of employers' SSC
50
40
30
30
20
20
10
10
0
0
NZL
DNK
AUS
CHL
ISL
CHE
MEX
ISR
IRL
USA
KOR
CAN
GBR
NOR
NLD
LUX
OECD
JPN
FIN
TUR
POL
PRT
EST
ESP
SVN
SWE
DEU
GRC
ITA
BEL
SVK
CZE
AUT
HUN
FRA
40
Source: OECD Taxing Wages.
Reducing banks’ bad debts is urgent
%
25
Bad debts (sofferenze) as % of total outstanding loans
Actual
20% write off ratio and slow bank loans growth
20% write off ratio and faster bank loans growth
20
13% write off ratio and slow bank loans growth
30% write off ratio and slow bank loans growth
30% write off ratio and faster bank loans growth
%
25
20
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
0
2013
0
2012
5
2011
5
2010
10
2009
10
2008
15
2007
15
Note: For more details see Economic Survey of Italy, 2017.
Source: Calculations based on OECD Economic Outlook No. 100: Statistics and Projections Database.
 Set gradual and bank-specific targets to reduce non-performing
loans, backed up by sanctions.
Productivity is higher where public
administration is more efficient
Note: For more details see Economic Survey of Italy.
Source: OECD calculations using ORBIS and Open Civitas data.
A more efficient public administration
raises firms’ productivity
% pts
Effect on firms performance of increasing public administration efficiency
from the bottom quartile to the top quartile of the province-level distribution
% pts
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
Labour productivity growth
Value added growth
Note: For more details see Economic Survey of Italy, 2017.
Source: OECD calculations based on ORBIS database and OPEN CIVITAS data
Total factor productivity growth
0.0
Insolvency procedures are slow and costly
Average recovery rate, %
100
Average recovery rate, %
100
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
TUR
CHL
GRC
EST
HUN
LUX
CHE
LVA
SVK
POL
ISR
ITA
CZE
MEX
ESP
OECD
PRT
SWE
FRA
USA
AUS
AUT
NZL
KOR
DEU
ISL
CAN
IRL
DNK
SVN
GBR
NLD
BEL
FIN
NOR
JPN
90
Source: Doing Business 2016: Measuring Regulatory Quality and Efficiency (Resolving insolvency database).
 Facilitate the emergence of insolvent firms as viable firms by
using debt-equity swaps.
R&D spending is low
% of GDP
5.0
Gross domestic expenditure on R&D
% of GDP
5.0
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
CHL
MEX
GRC
SVK
CHE
POL
TUR
ESP
LUX
PRT
ITA
HUN
EST
IRL
CAN
GBR
NOR
ISL
CZE
NLD
FRA
OECD
SVN
BEL
DEU
DNK
AUT
SWE
FIN
JPN
ISR
KOR
4.5
Source: OECD Main Science and Technology Indicators database
 Evaluate the effectiveness of recently introduced R&D fiscal
incentives included in the Industry 4.0 plan.
Main recommendations
Sustaining inclusive growth
 Continue on the path of prudent fiscal policies and prioritise spending on effective
infrastructure and innovation programmes.
 Increase tax revenues by enhancing tax compliance (by investing more in IT systems
and human resources, extending the use of e-invoicing and lowering the threshold
for cash payments); and introduce real estate taxes based on updated cadastral
values.
 Use additional tax revenues to gradually reduce social security contributions on
permanent contracts.
Main recommendations
Sustaining inclusive growth
 Continue to develop the secondary market for NPLs.
 As envisaged by the European Supervisory Mechanism, set gradual and bankspecific targets to reduce NPLs, backed up by sanctions such as additional
provisioning, sales of assets, suspension of dividend payments and restructuring
banks’ operations.
 If public funds are needed to recapitalise distressed banks, take full advantage of
EU regulations, imposing losses on equity and bondholders, and restructuring
banks’ operations. Compensate retail bondholders for the losses they will incur.
More in the Assessment & Recommendations
Main recommendations
Improving the business environment
 Continue efforts to enhance the efficiency and transparency of the public
administration by: making further progress on e-services; fully implementing
the broad public administration reform; amending the parts of publicadministration reform blocked by the Constitutional Court and swiftly
implementing them.
 Use debt-equity swaps more frequently by forcing creditors to share the burden
of firm restructuring.
 Approve the competition law under discussion by Parliament.
 Evaluate the effectiveness of recently introduced research and development tax
credits and other fiscal incentives in terms of innovation outcomes and forgone
tax receipts.
 Foster the development of the venture capital industry by leveraging private
funds and expertise.
More in Chapter 1 of the Economic Survey
Second challenge:
Improving skills
25
Unemployment has fallen but remains high
Unemployment rate, %
Youth unemployment rate, %
15
45
Total (lhs)
Young, <25 year-old (rhs)
12
40
9
35
6
30
3
25
0
2000
20
2002
2004
2006
2008
2010
Source: OECD, LFS database, Employment and unemployment (LFS)
2012
2014
2016
Skills are low
Average literacy score-points
320
North
Centre
South
Italy
Average literacy score-points
320
OECD
300
300
280
280
260
260
240
240
220
220
200
Immigrants
Young
Total population
Source: OECD Secretariat calculations using Survey of Adults Skills (PIAAC) 2012.
High education
200
Skill mismatches are high
% of over- and under-skilled workers in literacy, 2012
25
25
Under-skilled
Over-skilled
Source: Survey of Adults Skills (PIAAC) (2012).
ESP
AUT
CZE
ITA
DEU
IRL
SVK
AUS
GBR
Average
NOR
USA
KOR
JPN
0
EST
0
DNK
5
SWE
5
FIN
10
BEL
10
POL
15
CAN
15
FRA
20
NLD
20
Spending on job-search and training policies
can be increased
% of GDP
Spending on active labour market policies
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
USA
ISR
JPN
EST
SVK
CAN
GBR
AUS
NZL
ITA
CZE
SVN
KOR
POL
NOR
ESP
PRT
CHE
LUX
DEU
BEL
AUT
NLD
HUN
IRL
FRA
FIN
SWE
DNK
2.0
% GDP
2.0
Source: OECD (2016c), OECD Employment and Labour Market Statistics.
School results can further improve
Score pts
510
A. Reading
ITA
Score pts
OECD
510
B. Mathematics
ITA
OECD
Score pts
510
500
500
500
490
490
490
480
480
480
470
470
470
460
460
460
450
2006
2009
2012
2015
450
2006
2009
2012
2015
450
C. Sciences
ITA
2006
2009
OECD
2012
2015
Source: OECD PISA 2006, 2009, 2012 and 2015 Databases
 Build partnerships between schools and firms to create high quality
work-placements for students as foreseen by the Good School reform.
High level vocational education and training
should be scaled up
% of adults graduated from short-cycle tertiary VET programmes
25
20
15
10
0
ITA
POL
CZE
SVK
BEL
MEX
DEU
HUN
GRC
NLD
LVA
NZL
ISL
DNK
TUR
LUX
EST
CHL
SVN
OECD
SWE
GBR
USA
ESP
SVK
FIN
NOR
IRL
KOR
ISR
FRA
AUT
JPN
CAN
5
Source: OECD Education at a Glance 2016.
Main recommendations
Enhancing skills
 Employ more specialised counsellors and profiling tools in the public
employment services.
 Assess the labour market impact of job-search and training programmes and
focus funding on those that are performing well.
 Build partnerships between schools and businesses to create high quality workbased learning for students as envisaged by the Good School reform.
 Scale up post-secondary VET with strong involvement of the business sector,
based on the example of Istituti Tecnici Superiori.
 Establish a national body on VET involving the business sector and all key
stakeholders to link the training component of VET with apprenticeships; ensure
high-quality workplace training and identify skills needed in the labour market.
More in Chapter 2 of the Economic Survey
Third challenge:
Reducing poverty
Poverty among households with children has
increased
Absolute poverty rate, %
18
Couple with 3 or more children
16
14
Couple with 2 children
12
Couple with 1 child
10
Couple with no children and with the head of household over 65
years old
8
6
4
2
0
2006
Source: Istat.
2007
2008
2009
2010
2011
2012
2013
2014
2015
The share of transfers helping
the poorest has decreased
Share of total cash transfers received by the lowest income decile
%
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2004
2005
2006
2007
Source: OECD Income Distribution database.
2008
2009
2010
2011
2012
2013
The transfer system is poorly targeted
%
Share of total cash transfers received by the lowest income decile, 2013
%
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
ITA
TUR
GRC
ESP
PRT
CHL
POL
LUX
LVA
AUT
USA
EST
ISR
IRL
FRA
SVK
NOR
NLD
SVN
DEU
SWE
FIN
BEL
CZE
CAN
KOR
CHE
ISL
DNK
14
Source: OECD Income Distribution database.
Main recommendations
Reducing poverty
 Fully legislate and implement the planned nationwide anti-poverty programme,
target it towards the young and children and ensure it is sufficiently funded.
More in the Assessment & Recommendations
For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such
data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West
Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the
delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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