Italy is recovering after a deep and long recession. Structural reforms, accommodative monetary and fiscal conditions, and low commodity prices have helped the economy to turn the corner.

1. 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

2. 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’ non-
performing loans are a burden
o More jobs are needed as well as better skills
o Poverty among young and children should be brought down

3. The economy is finally recovering after
a deep and long recession
Source: OECD Economic Outlook 100 Database, projections revised as of 20 January 2017
GDP growth, annual % change GDP growth, annual % change
-6
-5
-4
-3
-2
-1
0
1
2
3
4
-6
-5
-4
-3
-2
-1
0
1
2
3
4
2005 2007 2009 2011 2013 2015 2017

4. 0
2
4
6
8
10
12
14
Jan-2013/Nov-2014 Jan-2015/Nov-2016
Other new hirings
New hirings on permanent contracts
New hirings, millions
Reforms have boosted hirings
Source: Istituto nazionale della previdenza sociale (INPS) Osservatorio sul Precariato.
Jobs Act
enacted in
early-2015

5. Higher employment has increased
private consumption and growth
Source: OECD Economic Outlook 100 Database
-12
-8
-4
0
4
8
2000 2002 2004 2006 2008 2010 2012 2014 2016
Total fixed investment Private consumption
Y-o-Y % changes

6. Fiscal policy is supporting growth
Source: OECD Economic Outlook 100 Database, updated on 20 January, 2017.
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Cyclically adjusted government net lending, % potential GDP

7. 0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
EST GBR NLD AUT DNK BEL LVA FRA SVK ESP SVN PRT IRL ITA GRC
%%
Banks’ non-performing loans are high
Non-performing loans to total gross loans
2016Q2 or latest available
Source: IMF Financial Soundness Indicators.

8. Good progress on structural reforms
Source: OECD compilation.
Reforms approved Ongoing reforms Reforms to do
Jobs Act
Youth Guarantee
Spending reviews
Budget making process
Public procurement code
Anti-corruption (ANAC)
Tax evasion and
compliance
Public administration
Competition law
National anti-Poverty
programme
Job-search and training
policies
Buona Scuola
Industry 4.0 Plan
Lowering cash payment
thresholds
Permanent cut in social
security contributions
Real estate tax based on
updated cadastral values
Re-launching infrastructure
spending
Broad reform of insolvency
procedures
National anti-poverty
programme

9. First challenge:
Boosting growth and
reducing banks’ bad debts

10. Productivity is low but
is starting to recover
Source: OECD Economic Outlook 100 Database, projections revised as of 20 January 2017.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Annual % changeAnnual % change
Total factor productivity Capital deepening Labour productivity (trend)

11. Public debt has stabilised but remains high
Note: For more details see Economic Survey of Italy, 2017
Source: OECD Analytical database and OECD calculations.
100
105
110
115
120
125
130
135
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
% of GDP

12. Stronger growth will help reduce public debt
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).
80
90
100
110
120
130
140
80
90
100
110
120
130
140
2000 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30
Debt to GDP ratio, % Debt to GDP ratio, %
Higher GDP growth (+0.5%)
Higher interest rate (+1.4% points)
Baseline

13. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2000 02 04 06 08 10 12 14 16
% of GDP
Italy France Germany United States
% of GDP Government fixed capital
Prioritise spending on
effective infrastructure programmes
Source: OECD Analytical Database; and OECD, National accounts database.

14. Tax collection remains low
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.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
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
VAT revenue ratio, 2014VAT revenue ratio, 2014

15. Lowering social security contributions will
boost job creation
Source: OECD Taxing Wages.
0
10
20
30
40
50
60
0
10
20
30
40
50
60
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
%
Average rate of employers' SSC
Average rate of employees' SSC
%
ITA
Average social security contribution (SSC) rate

16. 0
5
10
15
20
25
0
5
10
15
20
25
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Actual 13% write off ratio and slow bank loans growth
20% write off ratio and slow bank loans growth 30% write off ratio and slow bank loans growth
20% write off ratio and faster bank loans growth 30% write off ratio and faster bank loans growth
%
 Set gradual and bank-specific targets to reduce non-performing
loans, backed up by sanctions.
Reducing banks’ bad debts is urgent
Note: For more details see Economic Survey of Italy, 2017.
Source: Calculations based on OECD Economic Outlook No. 100: Statistics and Projections Database.
% Bad debts (sofferenze) as % of total outstanding loans

17. 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.

18. 0.0
0.5
1.0
1.5
2.0
2.5
0.0
0.5
1.0
1.5
2.0
2.5
Labour productivity growth Value added growth Total factor productivity growth
% pts% pts
A more efficient public administration
raises firms’ productivity
Effect on firms performance of increasing public administration efficiency
from the bottom quartile to the top quartile of the province-level distribution
Note: For more details see Economic Survey of Italy, 2017.
Source: OECD calculations based on ORBIS database and OPEN CIVITAS data

19. Insolvency procedures are slow and costly
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.
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
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
Average recovery rate, % Average recovery rate, %

20. R&D spending is low
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.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
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
% of GDP Gross domestic expenditure on R&D % of GDP

21. 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.

22. Main recommendations
Sustaining inclusive growth
 Continue to develop the secondary market for NPLs.
 As envisaged by the European Supervisory Mechanism, set gradual and bank-
specific 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

23. 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 public-
administration 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

24. 25
Second challenge:
Improving skills

25. Unemployment has fallen but remains high
Source: OECD, LFS database, Employment and unemployment (LFS)
Unemployment rate, % Youth unemployment rate, %
20
25
30
35
40
45
0
3
6
9
12
15
2000 2002 2004 2006 2008 2010 2012 2014 2016
Total (lhs) Young, <25 year-old (rhs)

26. Skills are low
Average literacy score-points
Source: OECD Secretariat calculations using Survey of Adults Skills (PIAAC) 2012.
200
220
240
260
280
300
320
200
220
240
260
280
300
320
Immigrants Young Total population High education
North Centre South Italy OECD
Average literacy score-points

27. Skill mismatches are high
Source: Survey of Adults Skills (PIAAC) (2012).
0
5
10
15
20
25
0
5
10
15
20
25
NLD
FRA
CAN
POL
BEL
FIN
SWE
DNK
EST
JPN
KOR
USA
NOR
Average
GBR
AUS
SVK
IRL
DEU
ITA
CZE
AUT
ESP
Under-skilled Over-skilled
% of over- and under-skilled workers in literacy, 2012

28. 0.0
0.5
1.0
1.5
2.0
0.0
0.5
1.0
1.5
2.0
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
% GDP
Spending on job-search and training policies
can be increased
Source: OECD (2016c), OECD Employment and Labour Market Statistics.
% of GDP Spending on active labour market policies

29. School results can further improve
 Build partnerships between schools and firms to create high quality
work-placements for students as foreseen by the Good School reform.
Source: OECD PISA 2006, 2009, 2012 and 2015 Databases
450
460
470
480
490
500
510
2006 2009 2012 2015
B. Mathematics
ITA OECD
Score pts
450
460
470
480
490
500
510
2006 2009 2012 2015
A. Reading
ITA OECD
Score pts
450
460
470
480
490
500
510
2006 2009 2012 2015
C. Sciences
ITA OECD
Score pts

30. High level vocational education and training
should be scaled up
Source: OECD Education at a Glance 2016.
0
5
10
15
20
25
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
% of adults graduated from short-cycle tertiary VET programmes

31. 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 work-
based 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

32. Third challenge:
Reducing poverty

33. Poverty among households with children has
increased
Source: Istat.
0
2
4
6
8
10
12
14
16
18
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Couple with 3 or more children
Couple with 2 children
Couple with 1 child
Couple with no children and with the head of household over 65
years old
Absolute poverty rate, %

34. The share of transfers helping
the poorest has decreased
Source: OECD Income Distribution database.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Share of total cash transfers received by the lowest income decile%

35. 0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
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
% %
The transfer system is poorly targeted
Source: OECD Income Distribution database.
Share of total cash transfers received by the lowest income decile, 2013

36. 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

37. 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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