With all the commotion centring on Italy and its politics, we thought it would only be fitting to put up a few charts on the Italian economy. The first and most important chart of them all is the public debt to GDP. In economics, the debt-to-GDP ratio is the ratio between a country’s government debt and its gross domestic product. A low debt-to-GDP ratio indicates an economy that produces and sells goods and services sufficient to pay back debts without incurring further debt. Australia for example has a public debt to GDP ratio of 41.90% and we can comfortably pay it back. Italy however has a debt to GDP ratio of 127% or there about. Anything above 100% and it becomes a drain on the economy because the repayments are higher than what the country can produces or can afford. In simple, the debt will never be paid off and the country will at some stage run the risk of default. Italy will need a plan of action and leniency from rating agencies.
The next chart depicts Italian GDP. This quarter the economy was up by 0.3% in the three months to March of 2018. The Italian Economy’s total output is $2.181 trillion. It rates as the 8th largest and is double Australia’s $1.205 trillion. It is the 3rd largest economy in the EU. On the production side, services and agriculture expanded this quarter, while industry was broadly stagnant. Year-on-year, the gross domestic product was around 1.4% below 1.6% in the previous period.
The final chart shows Italy unemployment figures. It stands at 11% in March of 2018, which by our standards is very high. One of the major challenges Italy has is its inability to rectify high levels of unemployment. Poverty seems to be increasing even during its modest economic recovery. Unemployment remains significantly higher than the euro zone average and that’s a big problem. One of the reasons Italy has such a high rate of unemployment is because it is very hard to do business in Italy. Business owners and entrepreneurs need to jump through bureaucratic hoops and to pay hefty fees even before starting the business. After starting it owners are subject to irrational tax deadlines and bureaucratic checks. Almost one in five young Italian is unemployed. The economy has shrunk over the years. Its banking sector has its own problems and the supply of credit is constrained. Small to medium enterprises are strapped for cash and cannot employ meaningfully. These structural problems along with corruption, and bureaucracy are what hold Italy behind from every recovering. Youth unemployment rate fell to 31.7% in March from 32.5% in February, which is still very high.