Italian Capitalism and Global
Competition - Economics
Scenario Analysis
Milan, Italy – 27 June 2015
Catherine L. Mann
OECD Chief Economist
Road Map
 The global outlook
 Europe: a lagging region (starting to
catch up?)
 Italy: a laggard within Europe (signs
of a pick-up?)
 Structural factors holding back
improved economic performance in
Italy
Global growth is projected to strengthen,
though remaining below long-run averages
Reduced fiscal
drag— but need
better balance
Real GDP growth
Per cent, seasonally adjusted annualised rate
7
6
7
World
OECD
Non-OECD
6
5
5
4
4
3
3
2
2
Monetary
easing—for 50%
of global GDP
Currency
depreciation—
except US
1995-2007 average
1
1
0
0
Source: June 2015 Economic Outlook database.
Lower oil prices
– adds 0.5% to
level of global
GDP
3
Despite the prospective improvement,
the world economy only rates a “B-”
4
Scarring of the labour market persists
Long-term unemployed (more than one year)
Per cent of total unemployed1
60
NEET2 rates among youth
Per cent of youth population aged 15-29
60 20
Q4 2007
2007
Q4 2014
50
20
2014
50
15
15
40
40
30
30 10
10
20
20
5
10
0
5
10
United States
OECD
Japan
Euro area
0
0
Japan
1. Three-quarter moving averages, not seasonally adjusted.
2. Not in employment, education or training.
Source: OECD calculations based on quarterly national labour force surveys.
OECD
Euro area
United
States
0
5
The investment recovery lags previous cycles
Business investment in different cycles
Sluggish investment
means:
Cyclical peak in OECD real business fixed investment=100
(date of peak indicated)
150
150
t=1973Q4
●
Labour scarring
t=1981Q4
140
140
t=2000Q3
t=2008Q1
130
130
120
120
110
110
100
100
90
90
Stagnant incomes,
rising inequality
●
Slower diffusion from
innovation frontier
●
Slower potential
growth
●
80
t
2
4
6
8
10
12
14
16
18
20
22
24
26
28
80
Quarters since the peak
Source: June 2015 OECD Economic Outlook database.
6
Focus in on Europe and Italy
7
The euro area has been a laggard since
the crisis
GDP per capita
Unemployment rates
Volume index, 2008 = 100
Per cent
106
14
USA
104
102
JPN
Euro area
OECD Europe excl.euro area
12
10
8
100
6
98
4
96
94
2
United States
Euro area
Japan
0
Source: June 2015 Economic Outlook database; OECD National Accounts database’; OECD calculations .
8
Investment in Italy has been especially hardhit by the crisis and fiscal consolidation
Private non-residential and government
fixed capital formation
Capital stock excluding housing
Volume index, 2000=100
Volume index, 2008 = 100
110
ITA
USA
GBR
FRA
DEU
105
160
ITA
OECD
FRA
GBR
150
100
140
95
90
130
85
120
80
75
110
70
100
65
60
2008
2009
2010
2011
2012
2013
2014
90
Source: June 2015 OECD Economic Outlook database.
2000
2002
2004
2006
2008
2010
2012
2014
Potential growth has slowed in most major
advanced economies, but especially in Europe
and above all in Italy
Contributions to average annual percentage change of potential GDP per capita
Source: June 2015 OECD Economic Outlook database.
But there are signs of an
incipient economic recovery
Real GDP growth
Seasonally adjusted annualised rate, per cent
5
4
3
2
1
0
-1
2011
2012
2013
2014
2015
-2
-3
OECD
-4
-5
Source: June 2015 OECD Economic Outlook database.
Euro area
Italy
2016
Unemployment is still high, but there are more
jobs, and more confidence among job seekers
Unemployment rate
Per cent
50
45
14
Total
15-24
13
40
12
35
11
30
10
25
9
20
8
15
7
10
6
5
5
0
4
The rate would already be
lower but for the (welcome)
pick-up in labour force
participation since 2011
Actual unemployment rate
Counterfactual unemployment rate with LFPR fixed
at 2007 level
2007
Source: June 2015 OECD Economic Outlook database.
2008
2009
2010
2011
2012
2013
2014
2015
Participation rates are still low,
especially for women
Labour force participation rate
Men
%
90
%
90
85
85
80
80
75
75
70
70
65
65
60
60
55
50
France
Germany
Italy
United Kingdom
OECD countries
55
50
45
45
40
40
Source: June 2015 OECD Economic Outlook database.
Women
France
Italy
OECD countries
Germany
United Kingdom
Features of Italy’s business environment
hinder the diffusion of innovation…
Estimated frontier spillover (% p.a.) associated with a 2 percentage point increase in
MFP growth at the global productivity frontier
Globalisation
Reallocation
Knowledge-Based Capital
Source: Saia, A., D. Andrews and S. Albrizio (2015), “Public Policy and Spillovers From the Global Productivity
Frontier: Industry Level Evidence”, OECD Economics Department Working Papers, forthcoming.
14
Skill mismatches hold back productivity and
wage growth
Potential gains from reducing skill mismatch
40
35
12
Percentage of workers with skill mismatch (LHS)
Gains to labour productivity from reducing skill mismatch (RHS)
10
30
8
25
20
6
15
4
10
2
5
0
0
POL CAN BEL SWE USA FRA NLD DNK JPN
FIN
EST KOR GBR NOR SVK AUS DEU AUT
IRL
CZE ESP
ITA
Note: The figure shows the percentage of workers who are either over- or under- skilled and the simulated gains to
allocative efficiency rom reducing skill mismatch in each country to the best practice level of mismatch. The figures are
based on OECD calculations using OECD Survey of Adult Skills (2012).
Source: M. Adalet McGowan and D. Andrews (2015), "Labour Market Mismatch and Labour Productivity: Evidence from
PIAAC Data" OECD Economics Department Working Paper No. 1209.
15
Returns to education are low, creating a negative
feedback loop between education, skills, growth
16
Weak trust in government and regulatory enforcement
Survey measures of perceived corruption
and trust in national government
%
100
GRC
PRT
Government corruption
0.90
ITA
KOR
ESPISR
HUN
USA
SVN
POL
SVK
ISL
AUT
JPN
CHL
EST MEX OECDBEL
IRL
FRA
DEU
70
60
50
1.00
CZE
90
80
Regulatory enforcement index
R² = 0.80
0.80
0.70
0.60
TUR
0.50
CAN
0.40
GBR
40
30
NLD
FIN
AUS
0.30
NOR LUX
NZL
20
DNK
10
0.20
CHE
0.10
SWE
0.00
0
0
10
20
30
40
50
60
70
80
Confidence in national government
90
100
%
Note: Confidence in government score is % of "yes" answers to the question: "In this country, do you have confidence in […] national
government?" Government corruption is % of “yes” answers to the question: Is corruption widespread throughout the government?” Data for Chile,
Germany and the United Kingdom are 2011 rather than 2012. The regulatory enforcement index ranges from 0 (low enforcement) to 1 (high
enforcement). Data for Iceland, Ireland, Israel, Luxembourg, Slovak Republic, Switzerland are not available.
Source: Gallup World Poll and World Justice Project .
Summing up
The near-term outlook for the world and Italy is better
than the recent past… but
Risk of persistent slow growth equilibrium remains
substantial in most major advanced economies, and
especially in Italy
Italy has a range of structural policy challenges that
must be addressed if long-term growth prospects are
to improve
Riforme: Avanti tutta!
18