Performance overview: Italy
Italy’s competitiveness score has improved but more slowly than others’, and it slips one spot to 44th. Its financial and labor markets and institutions continue to be its weakest areas, with rankings below 100th. Reforms implemented in recent years have improved businesses’ perception of ethics and corruption (up 14), but public-sector performance remains poor, with pervasive red tape and a highly inefficient judicial system. Italy’s labor market has become more efficient (up 17 since 2014): hiring and firing practices have been made more flexible and a framework was provided for more decentralized wage determination, but the full benefits of these reforms will require time and more cooperative labor-employer relations. In the meantime, Italy continues to squander its talent: in the south of the country, only one in three women work (according to the Italian Institute of Statistics (ISTAT), women’s employment rate in southern Italy was 30.6 percent in 2015), while reforms to the pension system introduced in 2012, albeit necessary, have further closed the job market to youth. Financial market development (122nd) is Italy’s weakest link: the banking sector is burdened by non-performing loans, and some institutions need recapitalization. Recent scandals in mutual banks have further undermined trust, while governance issues—including the strong link with local banking foundations—have been only partially addressed. Italy has strengthened its macroeconomic position, but public debt remains high in light of low inflation. Innovation and business sophistication remain among the strengths of the Italian economy and Italy continues to improve important dimensions of its digital readiness as seen in the World Economic Forum’s Global Information Technology Report 2016.