Italy’s economy, the eighth largest in the world, is fully diversified, and dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. Yet Italy continues to attract less foreign direct investment than many other European industrialized nations. The government’s efforts to implement new investment promotion policies to position Italy as a desirable investment destination have been undermined in part by Italy’s slow economic growth, unpredictable tax regime, multi-layered bureaucracy, and time-consuming and often inconsistent legal and regulatory procedures.
There were several significant investment-related policy developments during 2019, including enactment of a digital services tax (DST) that primarily targets tech firms and media companies; the Italian government’s extension of its Golden Power investment screening authority to procurement of 5G-related goods and services from non-EU suppliers; and the government’s March 2019 signing of a memorandum of understanding (MOU) with China to endorse partnership with the Belt and Road Initiative (BRI). While the MOU is neither a treaty nor an agreement, Italy’s signature signaled the Italian government’s keen interest in attracting investment from China in its infrastructure.
Italy’s relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research, remain attractive to many investors. The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors. Tourism is an important source of external revenue, as are exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food, and wine, as well as textiles/fashion. The sectors that have attracted significant foreign investment include telecommunications, transportation, energy, and pharmaceuticals.
Italy is an original member of the 19-nation Eurozone. Germany, France, the United States, the United Kingdom, Spain, and Switzerland are Italy’s most important trading partners, with China continuing to gain ground. Italy’s economy outperformed expectations for 2019, with modest GDP growth of 0.3%, (exceeding consensus projections of 0.2%); a government budget deficit of 1.6% of GDP, the lowest level registered since 2009, and an unchanged public debt to GDP percentage of 134.8%. Another positive factor was that government borrowing fell from 2.2% of GDP in 2018 to 1.6% of GDP in 2019. The significant decrease in debt servicing costs reflected the decrease in yields on Italian government bonds during 2019.
|TI Corruption Perceptions Index||2019||51 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||58 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||30 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||$38,479||https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|World Bank GNI per capita||2018||$33,730||http://data.worldbank.org/