According to Patrick’s proprietary model, Italy will have almost zero economic growth for the foreseeable future. Yes, there will be up years and down years along the way but the long-term growth pattern is completely flat. The reason is primarily the stagnant population growth coupled with a modest trade deficit. If the country had an export-driven economy, the stagnant population could be balanced with growing exports. But when both the population is going sideways and local businesses aren’t growing their exports, it spells trouble for GDP growth. Italy also has a relative disadvantage because of the common Euro currency. The southern Mediterranean countries are less productive than the northern countries like Germany and Sweden, so the common currency makes Italian goods less competitive on international markets.
Even with negligible economic growth, Italy will remain politically stable and is unlikely to experience social unrest or violent protests. Yes, there may be incidents here and there but only in response to extreme circumstances. Because of the excessive public spending over the years, Italy is already confronting skepticism in the bond markets (manifested as higher interest rates) and will have to initiate additional austerity measures in the future. Depending on the severity of those cuts, “extreme circumstances” may or may not materialize.
Italy has the second highest median age of all the countries included in this model, second only to Japan. The life expectancy is also extremely high. This all contributes to political stability. Older people are far less likely than young people to protest. The population is actually expected to shrink between 2010 and 2050 and the import / export sector, while accounting for a significant portion of GDP (about 30%), is still amounting to an overall trade deficit.
Like most European countries, Italy has a significant “youth deficit” which will contribute to their population decline over the coming decades. Because of the long life expectancy, they also have a lot of older retired citizens. They will put additional strain on public resources through Italy’s generous entitlement programs. It’s very likely that those programs will be curtailed in the coming years. It’s worth noting that the Italian government has already passed legislation to slowly raise the retirement age (based on a complicated formula tied to life expectancy) but more reforms will be necessary to balance budgets in the coming years.
Patrick is an award-winning author and keynote speaker who can speak about demographic trends affecting Italy at conferences and business events in Rome, Milan or other Italian destinations.
DISCLAIMER: Projected results are NOT guaranteed. The forecasts for Italy above were calculated based on projected population data obtained from the World Bank website. The economic forecast used this demographic data along with adjusters for net exports, relative age distribution and per capita income projections. The political volatility forecast used the same demographic data along with adjusters for youth population percentage, projected economic growth and public government debt level. Please see the model methodology for more details.
Patrick Schwerdtfeger maintains a video blog entitled “Strategic Business Insights” and adds new videos on a regular basis. Some of the videos are ‘macro’ covering topics like global business trends and geopolitical dynamics. Others are ‘micro’ covering communication skills and your mental mindset. Access them here:
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