Italy’s GDP is recovering slowly and output per capita remains about 70% of the upper half of OECD countries. Rising activity has increased employment but most of the new jobs are temporary. Labour force participation has converged towards OECD average, but this is slowing the decline in unemployment. Still, unemployment remains high especially among younger workers. Private investment is expanding solidly, supported by tax incentives and reviving bank lending.
Income inequality and poverty rates rose sharply during the recession and remain high. The rise in poverty especially affected families with children, and in some regions material deprivation rates are very high. Greenhouse gas emissions are below the OECD average, but population exposure to air pollution is high.
Over the past two years, reform progress has been significant. Poor households now have access to a guaranteed minimum income, conditional on using public employment and other social services that however need to be strengthened. Education reforms has linked school curricula with workplace experience. Social security contributions for young workers have been cut. The whistle-blower reform is a further step to strengthen anti-corruption activities.
Low infrastructure quality, the regulatory burden, tax and public administration inefficiencies detract from the investment climate. The new procurement code is well thought out but its novelty and the lack of implementing regulation have delayed its full implementation, hindering public investment. Building effective vocational and education training and adult skill programmes would help reduce the high share of young not in employment or education and better match workers’ skills with the evolving workplace.
