Italy - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2021-10-28

Italy is the world’s eighth largest economy with a GDP of $1.85 trillion in 2020 and a per capita GDP of $31,630.

Italy’s GDP contracted by 8.9% in 2020 as a result of the COVID 19 pandemic and the lockdown measures imposed by the Italian Government. However, the OECD estimates that Italy’s GDP will bounce back, registering 4.5% growth in 2021 and 4.4% in 2022, due, in part, to expected public stimulus measures.

In 2020 Italy was the 16th largest market for U.S. exports, which totaled approximately $23.8 billion, and the fifth largest U.S. export market in the EU, following Germany, the Netherlands, France, and Belgium. However, export values to the Netherlands (Rotterdam) and Belgium (Antwerp) are skewed by the ‘Rotterdam Effect,’ in which goods are valued at the port of entry, but then distributed throughout the EU.

U.S. exports to Italy are concentrated in such high-value sectors as chemicals (23.1%), oil and gas (13%), transportation equipment (10.2%), primary metal manufacturing (9.5%), and computer and electronic products (7.9%). The United States remained by far Italy’s largest non-EU export market with roughly a 9% share of all non-EU exports. In 2020, the United States was Italy’s third largest destination for exports, with U.S. imports from Italy totaling $49.4 billion, following Germany and France. The U.S. had a goods trade deficit with Italy valued at $29.5 billion in 2020.

In 2019 Italian foreign direct investment in the U.S. totaled $43.7 billion, supporting 93,700 American jobs. Top industry sectors for Italian FDI include industrial equipment, software & IT services, food & beverages, metals, renewable energy, and auto components.

Italy’s cumulative inward FDI investment is well below the EU average, due largely to structural problems that affect domestic as well as foreign investment. U.S. direct investment in Italy totaled $34.9 billion in 2019, ranking eighth in Europe, less than half of U.S. investment in France and one-fourth the size of U.S. FDI in Germany. U.S investment in Italy is concentrated in manufacturing, computer services and software, and energy, with significant industrial relationships in the aerospace and automotive sectors.

The current Italian government, formed in February 2021, has been characterized as a “technical government” with broad political party support.  The government is focused on post-pandemic economic recovery and efficient application of the National Recovery and Resilience Program (NRRP), a fund of approximately $200 billion awarded to Italy by the European Commission.  Mario Draghi, former European Central Bank President, serves as “President of the Council of Ministers” (effectively, the Prime Minister) and Sergio Mattarella serves as “President of the Republic.”

The NRRP  is developed around three strategic axes — digitization and innovation, ecological transition, and social inclusion —  and aims to help Italy to recover from the economic and social damage caused by the pandemic crisis.  The program also has the stated goals of addressing the structural weaknesses of the Italian economy and leading the country along a path of ecological and environmental transition.

In August 2021, Italy received the first payment of €24.9 billion (equal to 13% of the total to be directed to Italy) in the form of grants and loans and without a requirement to show progress in implementing NRRP projects and reforms.  The EU Commission will disburse remaining tranches, however, based on Italy’s progress in fulfilling the 314 quantitative “targets” and 214 qualitative “milestones” agreed by Italy and the Commission.

Italy has a population of approximately 60 million. Industrial activity is concentrated in the north from Turin in the west through Milan to Venice in the east. This region is one of the most industrialized and prosperous areas in the world and accounts for more than 50% of Italy’s national income. Italy’s southern region, or “Mezzogiorno,” is less developed.

Small and medium-sized enterprises (SMEs) — many of them family-owned — comprise 95% of Italian businesses and produce 66.9% of Italy’s GDP.

Italy’s SME sector has a higher proportion of firms employing fewer than ten people than the EU average. These companies contribute nearly half of total employment and one-third of GDP.

Italy ranks 58 out of 190 countries in the 2020 World Bank Doing Business Report, and though its index score is gradually improving, it ranks 52 out of 180 countries in Transparency International’s 2020 Corruption Perception Index.A