Italy Economy

By | October 23, 2021


Although Italy has the fourth largest economy in the European Union in terms of gross domestic product (GDP), it is only in the lower midfield with a gross national income (GNI) per capita of (2017) US $ 31,020.

Italy made the transition from an agricultural to an industrial state relatively early on, benefiting from strong state influence. The Istituto per la Ricostruzione Industriale (IRI) was established as early as 1933 to support banks by acquiring securities and participating in companies. The second holding company Ente Nazionale Idrocarburi (ENI) was founded in 1953 and was particularly concerned with the development of the energy industry. Since their inception, the ENI and IRI have primarily been used to operate state investment control.

The dismantling of state influence began relatively late in Italy. A privatization concept was presented for the first time in 1990 and a law based on it was passed in 1992. This led to the end of the monopoly in telecommunications and significant progress in the abolition of the monopoly in electricity generation and distribution. In other areas, too, the dismantling of state holdings was continued. The most important economic policy problem areas at the beginning of the 21st century are the ongoing weak growth of the Italian economy and the associated high national debt, the crisis-prone banking sector, weak domestic demand and the strong north-south divide. Despite national funding and strong support with investment aid from the EU for the economic development of southern Italy (Mezzogiorno) as well as ongoing migration from southern to central and northern Italy and abroad, the income gap between the affluent north and the poorer south could not be reduced significantly. On the labor market, the north-south divide is expressed by serious regional disparities with unemployment rates of 20% in southern Italy with an average unemployment rate of (March 2017) 11.7% for Italy as a whole. The infrastructure in the south is also still inadequate.

In 2016, public debt reached a peak in Europe (after Greece) with a volume of 134.9% of GDP (1980: 59%). The annual budget deficit (2016) has a share of GDP of 2.8% (after 3.2% in 2015).

Foreign investment in Italy is at a low level. The cumbersome bureaucratic apparatus, excessively high tax burdens and rigid conditions on the labor market curb the investment appetite of foreign companies.

Foreign trade: Italy’s dependence on imports of important raw materials leads to only small export surpluses or even negative trade balances (2016: € 365.6 billion in imports, € 417.1 billion in exports). The most important export goods are machines and motor vehicles, metals and metal products, agricultural products (especially olives, fruit, wine and rice), chemical products, textiles, clothing and shoes. The majority of Italian export goods are delivered to Germany, France, Great Britain, Spain, the USA and Switzerland. The main import products include chemicals, crude oil, food, machinery and electronic equipment. Most of the imports are from Germany, France, China, the Netherlands and Spain.

Energy industry

The energy supply is essentially based on imported hard coal, crude oil and imported electricity. For years Italy has been consuming considerably more electricity than it can generate with its power stations. At the end of 2014, total electricity production was 267.6 billion kWh; the installed capacity of the power plants is (2014) 114 170 MW. 16.3% of this is attributable to solar power plants, 12.7% to hydropower plants and 11.9% to other renewable energy sources. The nuclear power plants (four were still in operation in 1987) have since been shut down for political reasons and due to the earthquake risk of the sites.


Around 15.6% of all employees work in the manufacturing industry (2016); it contributes 16.3% to GDP. The economic centers are in the north of the country. The main industrial agglomeration is formed by the Turin-Genoa-Brescia triangle. With Milan as the center, its foothills reach as far as Veneto. The attempts that have been going on since the 1950s to industrialize the economically backward south of Italy (Mezzogiorno) have so far not had any significant success. The most important branches of the processing industry are metallurgy, in the field of metal processing automotive and mechanical engineering and the manufacture of electrotechnical products, as well as the chemical industry, tire production, the food and luxury food industry (including pasta, canned fruit, vegetables, fish, edible oil, Cheese, Wine), cement industry as well as textile and clothing, especially the shoe industry. The silk industry has an old tradition with Como as its center; it is a leader in Western Europe. The Italian handicrafts are famous with centers in Florence and Venice.

The size structure of industrial companies is very heterogeneous. There are a number of technologically high-quality, capital and high-turnover large corporations, some of which have world renown, but the predominant small business is often quite patriarchal, which has proven to be extremely adaptable in many labor disputes and in different economic situations.

Service sector

According to, 73.4% of all employees work in the service sector (2016); the contribution to the creation of GDP is 73.8%. The sector includes, among others. public service, trade, finance, education, research, healthcare, business services. Tourism also plays a major role in this.

Tourism: Diverse landscapes (e.g. Alps, Adriatic coast, Riviera), excellent tourist facilities, the versatility of the cuisine, excellent wines as well as numerous historical sites and rich art treasures attracted around 55 million foreign visitors to the country in 2015; there were also around 58 million domestic tourists. The main travel destinations are Veneto and Lombardy. The most visited cities include Rome, Florence and Venice.

Overall, the north-east of Italy is the region with the largest share of tourism. The majority of foreign visitors come from Europe, with German tourists making up the majority with around 15.4 million annually. The Americans dominate the non-European guests with 3.4 million visitors per year.

Italy Economy