“FDI in Italy: A cure for the economy”
At the beginning of July, the Italian national institute of statistics (Istat) said that the country’s recovery was slower than expected. Just a few days after, the news came out announcing that the country’s GDP shrunk by 0.2% in Q2 with respect to Q1 in 2014.
Overall, household and business surveys provided a mixed picture, while first positive results emerged in the labour market. Aid industrial output, which in Italy is usually closely correlated with GDP, rose 0.9% in June, adding a positive side to the bad news.
The news clearly added pressure on Renzi’s ambitious reform plan, which Economy Minister Pier Carlo Padoan urged to implement as fast as possible.
At the beginning of the year, however, the new government raised expectations both in Italy and abroad that a new reform era was finally starting in the country, aimed at boosting the economy and flooding it with renewed foreign direct investment (FDI).
To make those expectations trustworthy for UK investors, deputy minister of the ministry of economic development Carlo Calenda flew to London at the beginning of July to sit at a press conference organised by law firm Orrick’s senior partner Alessandro De Nicola. The event hosted more than 100 UK-based Italian investors to persuade them that it is a good time to invest their money in the Italian economy.
Sitting at the panel discussion with the deputy minister was a group of Italian institutions including Stefano Nigro, head of investment promotion department promos – Invest in Lombardy and Salvator Roberto Amendolia, Senior Advisor Italian Chamber of Commerce UK and Steven Taylor, regional secretary of the British Chamber of Commerce for Italy in London.
While introducing the government’s plans to attract foreign capital to Italy, Calenda immediately pointed at the new presidency of Renzi as a factor that renewed interest in Italy and raised foreign investors’ expectations. However, he said, even such a positive political outlook has not erased the country’s hurdles. “We still have issues related to our justice, taxation and labour systems that are intertwined and need to be solved,” he said.
However, Calenda kept referring to Italy as a “land of opportunities” where, at the time of the conference, growth forecast for 2014 was of 0.8%. “Our public finances are healthier and healthier and we are currently looking at reducing our public expenditure, which we want to reduce and make more efficient,” Calenda added while pointing out that in 2012 the Italian public expenditure was pretty close to the European average, scoring 50.6% against 49.7%.
Talking about the government debt, Calenda said that financial stability is not at risk in Italy, where “fundamentals are good and the risk of a bubble is under control.” Calenda also pointed at “strong exports”, in particular in sectors like the textiles, clothes and leather products.
Marco Simoni, head of Calenda’s executive secretariat, added that the FDI Confidence Index is back to good levels after five years, although not much action has taken place in the country lately.
During the debate, Stefano Nigro talked about Destinazione Italia as part of his Invest in Lombardy – the service for attracting foreign investments into the Lombardy region. The project is promoted by Unioncamere Lombardia, the Lombardy Chambers of Commerce network and Promos – the Special Agency of the Milan Chamber of Commerce – with the support of Regione Lombardia.
“When they ask us why to invest in Italy and Lombardy, I always suggest that they look at the numbers. Italy’s GDP is the fourth in Europe and Lombardy’s GDP is 25% of the national’s total, higher than Norway, Greece, Austria, Denmark, Finland, Ireland and Portugal. Over 60% of FDI coming to Italy (92 of the top 100multinational companies in Italy). Moreover, registering property in Milan is faster and less expensive than in many EU economies,” he said.
Despite the good numbers brought as evidence by the deputy minister and other Italian representatives at the Orrick conference, Italy slipped back into recession for the third time in five years, causing Moody’s cutting its growth forecast from +0.5% to -0.1% and leaving its political and economic scenario quite uncertain.