Italy’s industrial economy is divided into two parts - developed industries in the northern region, and less-developed welfare-dependent in the South with a high unemployment rate and a sizable underground economy. In addition, manufacturing is one of the most important sub-sectors within the industry sector.
Italy’s economic structure rests mostly on services and manufacturing. Within the service sector, the primary contributors are the wholesale, retail sales and transportation sectors. Italy is a renowned world leader in the fashion Industry. For this reason, Milan becomes one of the most important economic centers. The economy in the North is driven by the manufacturers of high-quality consumer goods that are produced by small and medium-sized enterprises, and most of them are family-owned. Hence, unemployment is lower and per capita income is higher in the north.
The country has few natural resources and largely depends upon oil imports.
Ever since the financial crisis arose in 2007, Italian economic policies aimed at reducing the country’s steeping public debt and government deficit. In December 2011, Mario Monti’s Italian government focused on a reduction of government spending to reduce public debt. Interestingly, in 2013, trade volumes increased significantly, thanks to Italy’s trading partners Germany, France, Switzerland, and the United States. Because of excessive macroeconomic imbalances in Italy, the European Union had requested the government to look into economic and structural reforms.
Italy’s political instability is one of the major reasons for lack of economic growth. Additionally, at the end of 2019 and beginning of 2020, the economic landscape started decreasing as the economy entered a technical recession. Additionally, the outbreak of coronavirus in mid-Feb 2020 disrupted tourism and supply chains which is a major hit to the manufacturing sector. The situation is seen to pose dangerous risks to the outlook. Public finances may suffer as there may be possible tax hikes later during the year. With nearly 2000 deaths in the country, Prime Minister Giuseppe Conte was forced to shut businesses for weeks. To rescue the Italian economy, he announced a release of 25 billion Euros to benefit the economic system of Italy.