10 June 2015
Economics & FI/FX Research
Economics Special
Italian exports:
current resilience and opportunities ahead
■ Despite the lack of progress on external competitiveness, Italian
exports have proved resilient since 2010, holding up relatively
well also during the sovereign-debt crisis.
■ Italian exports have grown more than potential demand in Italy’s
export destinations. However, demand in these destination
countries has grown less than world trade, causing Italy to lose
market share in world exports. In other words, unfavorable
geographic specialization weighs negatively on the performance
of Italian exports. More reorientation towards dynamic developing
Asian countries would pay off in the future.
■ Our analysis shows that Italy’s product specialization looks about
right, in the sense that global demand for Italian goods remains
strong. The technology content of Italian exports is still
comparatively low, but the high quality of exported goods comes
to the rescue.
■ Firms' size is key to export success. In Italy, only 10% of
exporting firms are large but these account for about 60% of total
exports. Italy would benefit from larger and financially stronger
firms, especially at a time when a return of global trade to the
solid growth rates of the past does not appear imminent.
Chiara Corsa, Economist
(UniCredit Bank)
+39 02 8862-0533
[email protected]
Loredana Federico, Economist
(UniCredit Bank)
+39 02 8862-0534
[email protected]
Bloomberg:
UCGR, UCFR
Internet:
www.research.unicredit.eu
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10 June 2015
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The export recovery is underway
Italian exports have recovered quite nicely since mid-2010, and following the collapse in global
trade in the wake of the financial crisis. They held up relatively well also during and after the
sovereign debt crisis, when another bout of weakness in global demand materialized. This
occurred despite the often-cited lack of tangible progress in terms of external competitiveness.
Since 2010, Italian exports 1 have increased on a cumulative basis by more than 25% in
volume terms and by more than 35% in value terms (chart 1) – at a time when real GDP has
contracted by 3.0%. This was mostly achieved between 2010 and 2011, when exports rose,
on average, by approximately 10% per year in volume terms and by more than 13% in value.
During the last three years (2012-14), the performance has been more subdued but still
respectable given the severity of the shock that resulted from the sovereign debt crisis; the
volume of exports expanded by 1.5% per year on average, while their value increased by an
average of 2.0% per year.
CHART 1: ITALY: DECENT EXPORT PERFORMANCE
Exports, (index 4Q09=100)
150
140
CHART 2: DEMAND FROM NON-EMU DRIVES EXPORTS
135
Volumes
130
Values
125
130
120
115
120
110
110
105
100
90
(Volume, 4Q09=100, MA(4) cumulated growth)
100
95
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14
Intra-EMU exports
Non-EMU exports
Potential demand - Intra-EMU
Potential demand - Non-EMU
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14
Source: national institutes of statistics, UniCredit Research
Italy’s export performance was underpinned by the recovery in global demand after the 2008-09
turmoil. The contribution from different geographical areas can be better assessed by looking at
chart 2, which breaks down Italian exports by destination (EMU and non-EMU trading partners)
and breaks down potential demand from EMU and non-EMU trading partners 2. The chart shows
that demand from the non-EMU trading partners has played the biggest part in driving the export
recovery through the entire time horizon (2010-14) – also given that exports to non-EMU
countries represent the largest share (60%) of total Italian exports. The recovery of demand from
EMU trading partners has, instead, remained more subdued.
In the early phase of the recovery, both exports to the EMU and to non-EMU countries held up
quite nicely (2010-11), even if the latter always outperformed.
Afterwards, exports to EMU countries contracted in the wake of the sovereign debt crisis,
while exports to non-EMU countries continued to hold up relatively well until 2013, supported
by both sounder demand conditions in these markets and the beneficial impact of a weaker
EUR (the depreciation of the nominal effective exchange rate).
1
In this analysis, we always refer to exports and imports of goods, excluding services, unless otherwise specified.
2
Following the Bank of Italy’s methodology, the export breakdown is estimated based on national account data. As weights, it uses the geographic breakdown of
exports’ value from the international trade statistics, which are deflated using producer prices of exports (we use the producer prices for the non-domestic euro area
and for non-euro area markets). The potential demand for Italian exports is computed as a weighted average of the volume of imports of Italy’s main trading partners
(which accounts for approximately 70% of Italy’s total exports), with weights being the share of Italy’s exports (in value) towards each trading partner.
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Economics & FI/FX Research
Economics Special
Only in the last two years (2013-14) have intra-area exports started to regain some ground, as
the recovery in domestic demand throughout the eurozone kicked in and the pace of expansion
of non-EMU exports flattened out a little due to both the cooling down of growth in emerging
markets and to an unfavorable exchange-rate dynamic – in trade weighted terms, the EUR
appreciated markedly from the last quarter of 2012 to the second half of 2014 (see chart 3).
CHART 3:
THE ROLE OF THE EURO
116
114
112
110
108
106
104
102
100
98
96
94
92
90
88
Dec-06
CHART 4: LOSS OF MARKET SHARE,
BUT GOOD JOB IN MEETING TRADING PARTNERS’ DEMAND
Trade-weighted EUR
135
(Volume, 4Q09=100, MA(4) cumulated growth)
130
sovereign debt crisis intensifies
125
120
115
110
Mkt bets on QE
105
"whatever it takes"
100
QE
Aug-08
Apr-10
Dec-11
Aug-13
95
May-15
Italian exports
World exports
Potential demand from
Italy's trading partners
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14
Source: ECB, national institutes of statistics, CPB, UniCredit Research
Chart 4 shows that Italian exports have grown more than potential demand in Italy’s export
destinations. We have already argued that this is due to favorable developments in non-EMU
destinations, where Italian exports grew more than the potential demand. The fact that Italian
exporters were more successful in the non-EMU destinations – which should, in theory, be
more difficult to reach – can be seen as a positive outcome, for two reasons. First of all, it reveals
that Italian exporters can be competitive in distant markets despite the usually small size of
exporting firms. Secondly, non-EMU markets tend to grow more dynamically. So far, so good.
Unfortunately, demand in Italy’s destination countries has grown less than world trade,
causing Italy to lose market share in world exports (chart 4). This tells us that unfavorable
geographic specialization weighs negatively on the performance of Italian exports. However,
this is not only an Italian story, as the loss of export share in global markets has been a
common feature among Italy’s main eurozone peers, with the exception of Spain.
In the following, we will analyze what caused Italy to lose market share vis-à-vis global trade
while at the same time gaining ground in its “traditional” export destinations and sectors.
This will help us to shed some light on the main strengths and weaknesses of Italy’s
export structure.
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What has driven Italy’s loss of global market share:
a comparative “shift-share” analysis
The first step of our analysis is to look at the drivers of Italian exports’ loss of market share in
global markets vis-à-vis that of Italy’s main peers, Germany, France and Spain.
To do this, we follow the so-called shift-share approach, which allows us to decompose the
change in a country’s market share into two effects: the market dynamism and the
competitiveness effect. Both can be seen from a product and destination-country perspective.
The market dynamism effect catches the impact of the product or geographical specialization
of the country, i.e. whether or not a specific country is specialized in sectors with dynamic
global demand and whether or not the destination countries are dynamic markets. The
competitiveness effect catches instead the impact of the reference country’s export strategy
within its geographical and product markets in terms of relative prices and other non-price
factors (for example, customization and quality of goods) 3.
In other words, the market dynamism effect reflects the impact of the structural features of a
specific country’s exports, whereas the competitiveness effect is related to the ability of a
country to increase its exports above export growth in destination countries and above world
export growth in each product.
CHART 5: ITALIAN EXPORTS ADVANCE BUT LAG BEHIND
CHART 6: GAINS AND LOSSES IN MARKET SHARE
30
Exports of goods (SA, constant prices, 4Q09=100)
27
140
24
130
21
120
110
100
Italy
90
80
Spain
4
Germany
France
6
World export growth 2010-2013
4
Change in market share, pp - RS
2
18
0
15
-2
12
-4
9
-6
6
-8
3
-10
0
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14
8
Export growth 2010-2013
Italy
Germany
France
Spain
-12
Source: national institutes of statistics, UN Comtrade, UniCredit Research
The analysis, which covers the four years between 2010 and 2013 5, provides first of all
confirmation that Italy was not alone in facing a loss of market share in global markets.
Moreover, the loss of market share was less than that recorded by France and was broadly in
line with that recorded by Germany. As noted above, Spain was the outperformer, having
been the only country among the four that gained market share in the period (see chart 6).
3
From a computational point of view, the market dynamism effect for a country is calculated as a weighted average of the difference between the growth rates of
world exports to each market destination and the growth rate of total world exports (when we look at the geographical specialization), or as a weighted average of
the difference between the growth rate of world exports of each product and the growth rate of total world exports (when we look at product specialization), with
weights being the share of the reference country’s exports towards each trading partner. The competitiveness effect for a country is calculated as a weighted
average of the difference between the growth rates of the reference country’s exports to each market destination and the growth rate of world exports to each market
destination (when we look at the geographical specialization), or as a weighted average of the difference between the growth rate of the reference country’s exports
of each product and the growth rate of world exports of each product (when we look at product specialization) with the same weights as described above.
4
The gains and losses in global market share are mirrored by the difference between the growth rate of the reference country’s exports (in value) minus the growth
rate of total world exports (in value) between 2010 and 2013.
5
This analysis is based on the United Nations’ Comtrade (UN Comtrade) database and uses the Harmonized System Code (HS) Commodity Classification
(two digits). Exports are expressed in nominal USD. Latest data used are from 2013, as 2014 data collection is still incomplete for some countries and products.
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Economics & FI/FX Research
Economics Special
The following paragraphs focus on the drivers of the change in market share for individual
countries (see chart 7 and 8).
Italy: From a geographic-specialization perspective, the loss of global market share was
caused by lower growth in Italy’s destination countries, compared to global export growth (low
market dynamism by country), and less so by lower growth of Italian exports compared to the
growth of destination countries (competitiveness loss by country). Regarding product
specialization, Italy’s loss of global market share was not a matter of products for which
exports have grown less than global exports (low market dynamism by sector), but was rather
a matter of Italy’s exports within these product markets growing less than world growth of
these product markets. The latter means that Italian products are less competitive than those
of their competitors in these product markets (competitiveness loss by sector).
CHARTS 7-8: SHIFT-SHARE ANALYSIS OUTCOME
10
8
6
(in pp)
8
Market dynamism by country
6
Competitiveness gain/loss by country
4
4
Market dynamism by sector
Competitiveness gain/loss by sector
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
-10
-10
(in pp)
Italy
Germany
France
-12
Spain
Italy
Germany
France
Spain
Source: UN Comtrade, UniCredit Research
Given all of these factors, Italy’s loss of global market share can be explained by the fact that,
while the product specialization of exports is the right one, the geographical composition is
less so. Moreover, when it comes to exports’ competitiveness, it seems that Italy has been
able to defend its market share in higher-end goods, where “made in Italy” is well recognized
and where non-price competitiveness matters more, but it has lost market share in more
standardized products, where cost and price competitiveness – which continues to be Italy’s
Achilles Heel – matters more.
France: France – whose loss of market share was larger than Italy’s – has broadly the same
features as Italy when it comes to unfavorable geographical specialization, and product
specialization. However, France faces an even worse problem: low competitiveness of its
products without the same ability Italy has to gain market share in specific sectors where
“made in Italy” is well recognized.
Germany: Germany’s loss of global market share has been driven less than the other
countries by unfavorable geographic specialization (Germany probably suffered less the low
growth in EMU countries) but more by its sector specialization. Moreover, over the period,
Germany has lost at least part of its advantage in terms of cost competitiveness, which
contributes to explain its loss of market share.
Spain: Spain’s is a completely different case: unfavorable geographic specialization, broadly
in line with that of Italy and France, was more than compensated by a strong pricecompetitiveness gain. The latter was attributable to the huge adjustment in unit labor costs
during the crisis.
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Economics Special
Italy has diversified its exports, although there is more to do
The analysis has so far elaborated on some of the reasons behind Italian exports’ loss of
market share in global trade. A complementary approach would look at the drivers of Italy’s
export performance vis–à–vis its main EMU peers to assess whether it was driven by the
ability (or the lack thereof) to diversify exports, to add new products or partners, or whether
this performance was more driven by the ability to increase export value for a given
geographical and product specialization.
In this respect, it is useful to divide the variation of exports over time into the contribution of
so-called extensive and intensive margins 6. The extensive margin tracks the change in the
number of combinations of trading partners and exported products (degree of diversification).
The intensive margin instead captures the change in the value of the reference country’s
exports for any given combination of market destinations and products (value effect). In this
approach, a cross-country comparison is particularly important.
The analysis covers the period from 2012 to 2014 7, and the results are shown in table 1.
During this period, Italian exports (in value terms) 8 rose by 2.0%, less than Germany (+3.8%)
and Spain, which confirmed its outperformance with export growth of 6.3%, but more than
France (-0.9%).
The good news is that the good performance of Italian exports was mainly explained by the
improvement in the extensive margin (i.e. Italy increased the combination of products and
destinations) and less by the intensive margin, which actually made a slightly negative
contribution to export growth. This means that Italian exporters have made more of an effort,
and successfully so, to increase the amount of products and destinations. However, when
Italy’s performance is compared to that of other countries, Spain stands out. The extent to
which Spain’s extensive margin has contributed to export growth is similar to Italy’s, but in
absolute terms, Spain’s effort to increase the extensive margin was far more successful and
explains the gap in the export performance. Nevertheless, compared to Spain, Italy performed
better in terms of its intensive margin, meaning that Italy has been more successful than
Spain in preserving the value of exports.
TABLE 1: BREAKING DOWN EXPORT GROWTH
% change 2012-2014
France
Spain
Germany
Italy
-0.9
6.3
3.8
2.0
Extensive margin
2.0
7.9
2.4
2.7
Intensive margin
-2.8
-1.4
1.3
-0.6
Exports (value)
Source: ComExt, UniCredit Research
Once again, France stands out as the worst performer. Even if it also made progress in increasing
its extensive margin, the improvement was more contained than it was in Italy and was not
enough to offset the sizeable deterioration in its intensive margin. Germany has instead shown a
more balanced performance, having achieved good results on both extensive and intensive
margins (both in absolute and relative terms), meaning that Germany’s export performance was
driven by both the effort to diversify more and to increase the value of its exports.
6
Note that this kind of analysis is often conducted with firm level data; therefore, another dimension of the extensive margin is represented by the number of firms. In
our analysis, we use aggregated data; therefore, we don’t take into account the variation in the number of firms.
7
The advantage of this approach is that it can be done based on a more updated database (Eurostat ComExt) compared to the one we referred to in the shift-share
analysis (UN Comtrade). However, due to methodological changes in 2012, the analysis on a longer period of time is not feasible. The exports are expressed in EUR.
8
Export data we deal with in this analysis are nominal value as in the shift-share analysis as the ComExt database we refer to, as well as UN Comtrade database,
does not provide export data in volume terms.
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Economics Special
Bottom line, the extensive/intensive margin analysis shows that Italian exports have become
more diversified since the outbreak of the sovereign debt crisis. At the same time, the analysis
shows that Italy has managed to maintain the value of its exports, given the country-specific
combination of products and destinations. This is probably due to the quality of Italian exports,
which has allowed Italy to defend, and in some cases improve, its market share in traditional
destination countries and sectors. Both these factors (diversification and value of exports) help
explains the resilience of Italian exports so far notwithstanding the persisting low cost
competitiveness.
In the next two sections we will focus more on the geographical and quality-related
specialization of Italian exports, to assess in more details the progress made so far and where
Italy needs to do more.
The pros and cons of Italy’s geographical specialization
Italian exports have lost market share in global exports, even though they managed to hold
the line in traditional destination countries and sectors. The loss of market share in world
exports was mainly due to unfavorable geographic specialization, while the mix of products
that Italy exports is right (in the sense that global demand for these goods is high and for
some of them Italy can benefit by non-price competitiveness gains).
The following is a more-detailed analysis of the evolution of the geographic diversification of
Italian exports from 2009 to 2014. The aim is to assess if, and to what extent, the degree of
diversification has increased, identifying if (and where) Italy can do more.
CHART 9: CHANGES IN EXPORT DESTINATIONS
14
12
10
8
CHART 10: ITALIAN EXPORTS BY TRADING PARTNERS
Italian exports by country (in %, 2014)
Export share changes (2009-2014, in pp)
Other
CIS
Sub-Saharan Africa
Middle East, North Africa, etc.
Latin America
Emerging and developing Asia
Advanced non-EU
EU non-EUR
EMU
Middle East, North
Africa, etc.
7.9%
Sub-Saharan
Africa
1.5%
CIS
3.3%
Other
5.5%
EMU
40.3%
Latin America
3.3%
6
4
Emerging and
developing Asia
4.8%
2
0
-2
Advanced non EU
19.1%
-4
-6
-8
-10
France
Germany
Italy
EU non-EUR
14.3%
Spain
Source: ComExt, UniCredit Research
Like all other large EMU countries, Italy saw its share of exports to EMU destinations decline
between 2009 and 2014 by 4pp, to about 40%. The geographic repositioning of exports away
from the EMU was (at least in part) driven by the lower growth of the euro area in the wake of
the sovereign debt crisis. Anyways, the lower share of exports to the EMU is good news as it will
help mitigate the impact of the comparatively lower growth dynamism expected in the euro area.
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However, compared to that of its eurozone peers, the repositioning of Italy’s exports away
from EMU countries was less pronounced than it was in Germany and Spain, where the
decline in the share of exports to EMU destinations was 6pp and 8pp, respectively (see chart 9).
More importantly, in the case of Italy, diversification was much more contained than in
Germany and Spain. The decline in the share of exports going to EMU trading partners was
indeed offset to a large extent (70%) by the increase of the share of exports going to
advanced non-EU countries: primarily the US but also Japan and Korea – the share of this
area increased by 3pp, to 19%, in the period from 2009 to 2014 (see charts 9 and 10).
Germany repositioned itself more towards non-EUR European countries – the share of these
countries increased by 1.6pp, while it was broadly unchanged in Italy – and particularly
towards 1. the UK, whose pace of economic growth has accelerated since 2013 more than in
the EMU – the share of exports going to the UK rose from 6.6% to 7.4%, while it remained
stuck at 5% in Italy – and 2. developing Europe (such as Hungary and Poland). But, more
importantly, Germany also increased its share of exports to emerging and developing Asia.
Italy has not been successful in this area, particularly when regarding exposure to China,
which remains very low compared to that of Germany – the share of exports going to
emerging and developing Asia in Italy remains below 5.0% (of which 2.6% to China), vs. 9.0%
in Germany (of which 6.6% to China) and 6.4% in France (of which 3.7% to China).
In Spain, geographic diversification was also noticeable, as the 8pp decline of the share of
exports to the EMU was offset by widespread reorientation towards other areas. Chart 9
shows that Spain not only increased exposure to advanced non-EU countries (+2.0pp in the
period 2009-2014) but also to non-EUR European countries; to the Middle East and North
Africa (in both cases by 1.5pp); to Latin America (+1.2pp); and, to a lesser extent, to emerging
and developing Asia (+0.7pp); to Sub-Saharan Africa (+0.3pp) and The Commonwealth of
Independent States (+0.3pp). It is worth noting, however, that even if the degree of
diversification was noticeable, especially when compared with Italy, Spain’s starting position
was particularly unfavorable, and the need to catch up with other EMU peers was compelling.
Even after the repositioning observed in the last few years, Spain’s geographic specialization
remains comparatively weaker than that of Italy and Germany, with exports to the EMU still
accounting for 50% of total Spanish exports (see charts 11 and 12).
CHARTS 11-12: A COMPARISON OF THE EVOLUTION OF EXPORT GEOGRAPHICAL SPECIALIZATION
60
55
50
45
40
35
30
25
20
15
10
5
0
Share of total exports, in % (in value terms)
EMU
EU non euro Advanced
non EU
Emerging
and
developing
Asia
Italy (2009)
Germany (2009)
Italy (2014)
Germany (2014)
Latin
America
Middle East, Sub-Saharan
North Africa,
Africa
etc.
60
55
50
45
40
35
30
25
20
15
10
5
0
CIS
Share of total exports, in % (in value terms)
EMU
EU non euro Advanced
non EU
Emerging
and
developing
Asia
Spain (2009)
France (2009)
Spain (2014)
France (2014)
Latin
America
Middle East, Sub-Saharan
North Africa,
Africa
etc.
CIS
Source: ComExt, UniCredit Research
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French exposure to non-EMU countries remained broadly stable, with the weight of these
countries on total exports rising from 51% to 53%. Still, it is worth highlighting that this came with a
higher increase, compared to both Italy and Spain, in the country exposure to the developing and
emerging Asian markets and, in perspective, this may be positive for this country.
We conclude that Italy, France, Germany and Spain all underwent some repositioning away
from the EMU and towards other areas, which to a certain extent, was caused by the
slowdown in the euro area in the wake of the sovereign debt crisis. However, the degree of
diversification was less intense in France and Italy than it was in Spain and Germany.
Nevertheless, all countries continue to show a geographic specialization that is still too
skewed towards the EMU, with the share ranging between 36% for Germany and 50% for
Spain. In comparison, the EMU’s share of global imports is around 12%. This helps explain
why the exports of these countries suffered a loss of market share in the wake of the
sovereign debt crisis. More reorientation towards dynamic, developing Asian countries would
pay off in the future, particularly in the case of Italy.
Italy may take advantage of its product specialization
In terms of products, Italian exports are characterized by a good degree of diversification.
Machinery and equipment account for the largest share of manufacturing exports (approximately
20%, see chart 13). This is followed by textiles and leather and basic metals and transport
equipment (including cars), with each worth about 10% of total manufacturing exports.
However, when Italy’s product specialization is compared to that of its main peers, some
weaknesses emerge mainly because Italy exports comparatively more medium-low and
low-technology goods.
Chart 14 depicts in detail the breakdown of Italian exports of manufactured goods by
technological content: the low and medium-low technology intensive sectors account for about
50% of the total. Moreover, the low-technology intensive sectors, which include food and
beverages, textiles and leather and other goods, (like furniture), have a very high share of
almost 30%. For the sake of comparison, in Germany and France, the shares of total exports
of low and medium-low technology intensive sectors are much lower, in the 30-35% range.
9
CHART 13: GOOD DIVERSIFICATION OF ITALY’S EXPORTS BUT… CHART 14:…SKEWED TOWARDS MEDIUM-LOW TECHNOLOGY
Exports by industry (in % of total exports, 2014)
80
25
Italy
20
Germany
France
France
70
Germany
Italy
Spain
60
15
50
10
40
5
20
Coke & petroleum
Wood & paper
Textiles & leather
Rubber & plastic
products
Pharmaceutical
Food, beverages &
tobacco
Electrical equip.
Other manuf. product
Computer &
electronics
Basics metals and
prod.
Chemicals
Machinery & equip.
n.e.c.
30
Transport equipment
0
Exports by technology content (in % of total exports, 2014)
10
0
High and medium-high
technology
Medium-low technology
Low-technology
Source: national institutes of statistics, UniCredit Research
9
We used the NACE Rev. 2 classification of economic activities. To our knowledge, this classification is not available for Spain.
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The most striking differences of Italy’s product specialization, compared to Germany and
France, are shown in chart 13. Italy exports a comparatively higher amount of textiles and
leather and a relatively lower amount of transport equipment, which represents the bulk of the
exports of high and medium-high technology goods in the two main peers.
This product specialization towards low-technology goods is often considered the main reason
behind Italy’s loss of market share, as Italy probably suffers relatively more from the fierce
competition of emerging economies, which produce more standardized goods.
However, this static picture does not tell the whole story. There have indeed been some
important changes in the specialization of Italy’s exports, and these might help explain why, as
shown by the shift-share analysis conducted above, the product mix has not been a major
drag in the evolution of Italy’s export market share in recent years.
First of all, Italian exports have been experiencing some important changes in their sectoral
composition, with some high and medium-high technology-intensive goods becoming
increasingly important. In particular, charts 15 and 16 show that, between 2005 and 2014, Italy’s
share of exports of machinery and equipment rose from 18.4% to 19.4% of its total exports. That
of pharmaceutical products, another sector with a high technology content, was up from 3.9%, to
5.4%. Moreover, even if the transport equipment sector’s share has remained broadly stable this
masks an increase in the market share of air and space-craft and motor vehicles, which
represent high- and medium-high-technology products. At the same time, sectors like textiles
and other manufacturing products, including furniture, lost export share.
CHARTS 15-16: BREAKDOWN OF ITALIAN EXPORTS BY INDUSTRY: UPS AND DOWNS
In % of total exports, 2014
In % of total exports, 2005
6.4
5.9
Machinery & equip. n.e.c.
18.4
7.1
Machinery & equip. n.e.c.
6.2
Transport equipment
19.4
Chemicals
11.0
6.7
3.9
Chemicals
12.3
Textiles & leather
13.4
Transport equipment
Pharmaceutical
Pharmaceutical
Textiles & leather
Rubber & plastic products
10.4
Other manuf. product
6.8
Rubber & plastic products
Other manuf. product
5.4
Source: ISTAT, UniCredit Research
Moreover, the slight increase of the share of low-technology-intensive goods from 2010 to
2014 covers the switch from more standardized goods – where Italy is probably more exposed
to competition from emerging markets, above all textiles – to niche products, which are the
cornerstone of the “made in Italy” brand: such as leather products, high-quality food and
beverages, jewelry and apparel (see chart 17).
In this respect, a recent paper from the European Commission 10 shows that Italy ranks above
Germany and Spain, when it comes to quality of exported goods. As a matter of fact, Italy
mainly produces medium-high quality goods, Germany is predominantly specialized in
medium-quality goods, while Spain’s product specialization is more skewed towards lowquality goods (and increasingly so).
10
Please see “Quality in Exports”, European Economy – Economic Papers, N. 528, September 2014
UniCredit Research
page 10
See last pages for disclaimer.
10 June 2015
Economics & FI/FX Research
Economics Special
CHART 17: LOW-TECHNOLOGY-INTENSIVE SECTORS
CHART 18: THE NON-PRICE COMPETITIVENESS MATTERS
Italian export growth rate (in %)
Breakdown of low technology-intensive sectors (in %)
24
22
20
18
16
14
12
10
8
6
4
2
0
2010-2013
2010
2014
11
Italian exports of products - world exports of products (in pp)
Pharmaceutical products
Articles of leather, animal gut, harness, travel good
Food products
Nuclear reactors, boilers, machinery, and mechanical
appliances; parts thereof
Articles of apparel, accessories
Beverages, spirits and vinegar
Vehicles other than railway, tramway
Food Beverages Wood and Paper and Textiles
products
product of paper
wood
products
Wearing
apparel
Leather
and
related
product
Aircraft, spacecraft, and parts thereof
Furniture Jewelry,
bijouterie
& related
Articles
-20
0
20
40
60
80
Source: ISTAT, UN Comtrade, UniCredit Research
Overall, Italy appears to have increased its product specialization among medium-high
technology intensive goods – although its share of total exports is not as high as it is in
Germany and France. Italy did this while maintaining its traditional specialization in
low-technology, high-quality niche goods. This is one reason why product specialization may
have allowed Italy to increase its share of exports to traditional destination countries despite
the competitive pressure on costs from emerging economies.
As a confirmation of this, chart 18 shows some of the products for which the pace of growth of
Italian exports has exceeded the pace of growth of world exports, meaning that in these
sectors, Italy has increased its market share. Among others, these sectors include high-quality
foods and beverages; some luxury goods, such as leather products (which are in the lowtechnology sector); and pharmaceuticals and machinery (which are in the high and mediumhigh-technology sector).
Exports are still held back by firms’ small size
In line with the average Italian firm’s structure, exporting firms are also small: 90% of exporting
firms employ less than 50 workers (chart 19). However, the country’s export capacity is
concentrated among its large firms 12.
Exporting firms employing more than 50 workers represent 10% of total exporting firms, but
they account for 60% of total exports (chart 20). Moreover, data show that firms with more
than 50 employees generate more than 40% of their turnover abroad, while this share drops
to 25% for firms with less than 20 employees.
11
We make this by using UN Comtrade data, classified by 2-digit-HS products, which allows a comparison with the world export growth by products. As above, the
disadvantage of using these data is that the latest data, for which exports data are reliable, are 2013.
12
Hard data on firms’ structures (e.g. size and competitiveness) are available but only as of 2012.
UniCredit Research
page 11
See last pages for disclaimer.
10 June 2015
Economics & FI/FX Research
Economics Special
CHART 19: FIRMS’ SIZE: SMALL DIMENSIONS PREVAIL
CHART 20: EXPORTS IN THE HANDS OF LARGE FIRMS
Exports of goods by size of exporting firms, in % of total exports
(x-axis: nr. of employees)
Number of exporting firms by size (x-axis: nr. of employees)
50,000
30
45,000
25
40,000
35,000
20
30,000
25,000
15
20,000
15,000
10
10,000
5
5,000
0
0-9
10-19
20-49
50-99
100-249
>250
0
0-9
10-19
20-49
50-99
100-249
>250
Not-specified
Source: ISTAT, UniCredit Research
This has two implications: 1. Large firms have weathered the storm of the sovereign debt crisis
much better than smaller firms, and this helps explain the resilience of exports in 2010-13.
2. Large exporting firms are characterized by higher productivity and profitability than smaller
firms (charts 21-22).
CHARTS 21-22: FIRMS’ PRODUCTIVITY AND PROFITABILITY: SIZE MATTERS
Value added per number of employees (thousands of EUR)
90
80
Exporting firms
Gross profit surplus on gross value added (in %)
50
Non-exporting firms
45
40
70
Non-exporting firms
35
60
30
25
50
20
40
15
30
10
5
20
0
10
0
Exporting firms
-5
0-9
10-19
20-49
50-249
>250
-10
Total
0-9
10-19
20-49
50-249
>250
Total
Source: ISTAT, UniCredit Research
Most of the time, approaching export markets located far away from the home country implies
meaningful fixed costs. These costs can prove to be too high for small businesses, especially
after the financial crisis took a heavy toll on their financial positions.
Therefore, it is not surprising that the export capacity of small firms is tightly correlated with the
profitability of their businesses. Charts 23 and 24 show that the share of foreign turnover in total
turnover generated by small firms (employing 1-9 and 10-19 workers, respectively) is the highest
in those sectors where growth of Italian exports outpaced growth in global trade, leading to an
increase of market share for exports. These sectors include high-quality foods and beverages;
some luxury goods, such as leather products, and machinery and equipment.
UniCredit Research
page 12
See last pages for disclaimer.
10 June 2015
Economics & FI/FX Research
Economics Special
CHARTS 23-24: FOREIGN TURNOVER OF SMALL FIRMS BY INDUSTRY SECTOR
Foreign turnover of small firms (in % of total, 0-9 employees)
Foreign turnover of small firms (in % of total, 10-19 employees)
25
35
30
20
25
15
20
10
15
10
5
Paper products
Coke & petroleum products
Wood and wood prod
Paper
Food products
Basic metals
Frabbricated metal prod
Other non-metallic mineral…
Chemicals
Rubber & Plastic Products
Electrical equip.
Furnitures
Computer & electronics
Motor Vehicles and etc.
Beverages
Pharmaceutical
Wearing apparel
Textiles
Other transport equip.
Leather and related prod.
Machinery & equip. n.e.c.
Other manufacturing prod
Paper products
Coke & petroleum products
Food products
Wood and wood prod
Pharmaceutical
0
Frabbricated metal prod
Paper
Other non-metallic mineral…
Rubber & Plastic Products
Furnitures
Basic metals
Chemicals
Electrical equip.
Beverages
Other transport equip.
Textiles
Other manufacturing prod
Wearing apparel
Motor Vehicles and etc.
Computer & electronics
Leather and related prod.
5
Machinery & equip. n.e.c.
0
Source: ISTAT, UniCredit Research
It is undisputable that the small average size of Italian firms weighs negatively on Italy's
competitiveness and on its ability to expand the growth of its exports.
Therefore, the government and the private sector should do more to support an increase in
firms’ size. In turn, this would improve the capacity to move on distant markets to exploit the
potential of Italian specialization, and, hence, increase Italy’s export share in global markets.
This is even more important in the current environment, where the pace of expansion of global
trade has been hovering well below its long-term average and where a return to stronger
growth rates of the past does not appear imminent.
Concluding remarks
Despite the often-mentioned lack of progress in external competitiveness, Italian exports have
recovered nicely since 2010; they have mainly benefitted from the good demand coming from
non-EMU countries.
Our analysis shows that Italian exports have lost market share in world exports, even though
they have managed to hold the line in traditional destination countries and sectors. Following
a shift-share approach, we demonstrated that the loss of market share in world exports has
mainly been due to unfavorable geographic specialization despite the fact that the mix of
products that Italy exports is right in the sense that global demand for these goods is high and,
for some of them, Italy can benefit from non-price-competitiveness gains.
A decomposition of export developments in the extensive/intensive margin confirms that
Italian exports have become more diversified since the outbreak of the sovereign debt crisis,
even if there is more to do. In particular, a detailed analysis of the geographical specialization
of Italian exports shows that Italy should increase its efforts to reach more dynamic export
destinations, such as emerging and developing countries, particularly in Asia.
A look at Italy’s product specialization highlights that Italy is well positioned to meet demand
from high-income advanced economies and from dynamic developing economies, given its
mix of products, ranging from machinery to luxury goods and high-quality food and beverages.
Still, the small size of Italy’s exporting firms represents a great obstacle. The country’s export
capacity is concentrated around its large firms, inevitably limiting the growth potential of the
whole country. Italy would benefit from larger and financially stronger firms, especially at a time
when a return of global trade to the solid growth rates of the past does not appear imminent.
UniCredit Research
page 13
See last pages for disclaimer.
10 June 2015
Economics & FI/FX Research
Economics Special
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EFI e 6
UniCredit Research
page 15
10 June 2015
Economics & FI/FX Research
Economics Special
UniCredit Research*
Erik F. Nielsen
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[email protected]
Tobias Rühl, Economist
+49 170 7599 985
[email protected]
Chiara Silvestre, Economist
[email protected]
Daniel Vernazza, Ph.D., Economist
+44 207 826-7805
[email protected]
Dr. Martina von Terzi, Economist
+49 89 378-13013
[email protected]
US Economics
Dr. Harm Bandholz, CFA, Chief US Economist
+1 212 672-5957
[email protected]
Anca Maria Aron, Economist, Romania
+40 21 200-1377
[email protected]
Anna Bogdyukevich, CFA, Russia
+7 495 258-7258 ext. 11-7562
[email protected]
Dan Bucşa, Economist
+44 207 826-7954
[email protected]
Hrvoje Dolenec, Chief Economist, Croatia
+385 1 6006 678
[email protected]
Ľubomír Koršňák, Chief Economist, Slovakia
+421 2 4950 2427
[email protected]
Marcin Mrowiec, Chief Economist, Poland
+48 22 524-5914
[email protected]
Carlos Ortiz, Economist, EEMEA
+44 207 826-1228
[email protected]
Kristofor Pavlov, Chief Economist, Bulgaria
+359 2 9269-390
[email protected]
Martin Rea, CFA, EM Fixed Income Strategy
+44 207 829-6077
[email protected]
Pavel Sobisek, Chief Economist, Czech Republic
+420 955 960-716
[email protected]
Chiara Cremonesi, FI Strategy
+44 207 826-1771
[email protected]
Elia Lattuga, FI Strategy
+39 02 8862-0538
[email protected]
Kornelius Purps, FI Strategy
+49 89 378-12753
[email protected]
Herbert Stocker, Technical Analysis
+49 89 378-14305
[email protected]
Global FX Strategy
Dr. Vasileios Gkionakis, Global Head, FX Strategy
+44 207 826-7951
[email protected]
Kathrin Goretzki, CFA, FX Strategy
+44 207 826-6076
[email protected]
Kiran Kowshik, EM FX Strategy
+44 207 826-6080
[email protected]
Armin Mekelburg, FX Strategy
+49 89 378-14307
[email protected]
Roberto Mialich, FX Strategy
+39 02 8862-0658
[email protected]
Commodity Research
Jochen Hitzfeld, Economist
+49 89 378-18709
[email protected]
Publication Address
UniCredit Research
Corporate & Investment Banking
UniCredit Bank AG
Arabellastrasse 12
D-81925 Munich
[email protected]
Bloomberg
UCCR
Internet
www.research.unicredit.eu
*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit Bank AG London Branch (UniCredit Bank London), UniCredit Bank AG Milan Branch (UniCredit Bank Milan),
UniCredit Bank New York (UniCredit Bank NY), UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, Bank Pekao, ZAO UniCredit Bank Russia (UniCredit Russia),
UniCredit Tiriac Bank (UniCredit Tiriac).
EFI 19
UniCredit Research
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