According to the Ministry of Defence, in 2015, defence expenditure for staff increased by 1.6%, while that for training (Operational related costs), was reduced by 14%. As announced, the 2016 Defence budget will be about €20 billion; 77% will be allocated to Personnel, 9% to Operational related costs and 11% to Investment (See chart below). 


Italy is the 8th largest economy worldwide and the 3rd in the Eurozone, despite the decreased growth rate as a result of the recent economic crisis, and a debt that surpasses the 132.6% of GDP (equal to €2.2 Trillion) in 2015 – quite in contrast to EU aims, that national debts should not exceed the 60% of the GDP.

Italy has had a primary surplus, for 22 consecutive years, apart from 2009. However, its highly negative GDP growth rate of -5.5%, at the beginning of the crisis (2009), showcases the Italian economy’s surprise upon such developments (see chart below). Since then, efforts have been concentrated on stabilizing the economy and increasing the overall GDP, but with lower than expected results. In reality, Italy’s GDP stagnation in the last few years has been caused by strict austerity measures that have led to a dramatic decrease in domestic demand.

Despite these obstacles, deficit decreased to 2.6% (of the 2015 GDP), remaining under the 3% threshold (the European Union’s constraint). In fact, after three years of contraction (2012-2014), the GDP turned to a positive growth rate of 0.8%, reaching the €1.6 Trillion (in current 2010 prices), in 2015.

According to the 2016 Stability program projections (approved by the government in April 2016), GDP will further increase by 1.4% (close to the 2007 levels), while debt will fall to 132.4%, in 2017.

Nowadays, more than 2/3 of Italy’s GDP is represented by the Services sector (see chart below), with the main contributor being the Tourism industry. In fact, the country’s historic cities –including the capital Rome- with numerous archaeological and artistic monuments, combined with the over 3,000 museums, as well as the picturesque Italian provinces, attract more than 76.3 million tourists per year, responsible for more than 1 million jobs and over €30 billion of income for the country.

On the other side, Italy is the 2nd manufacturing economy in the European Union and the 5th in the world (US $135 billion turnover), with the majority of the revenue being generated in the North of the country -followed by the South and Central Italy. High income, employment and numerous firms, have been created as the result of the activities of the main exporting sectors of agro-alimentary, machinery, apparel/textiles, industrial design and furniture.

Moreover, having created an “industrial cluster” model of development, Italy has managed to bring together the different sized industries, mapping them at the same time, into particular specializations and under specific phases of production. This structure, has allowed Italy to largely develop entrepreneurial initiative and autonomy, as well as promote further the creativity, sophisticated design and advanced machinery of the “Made in Italy” products.

Today, Italy is among the world’s largest exporters (8th worldwide) and the 5th largest exporter in Europe (2014) –after Germany, the UK, France and the Netherlands. It is worth noting though, that the country’s manufacturing identity has been changing; the 4 Fs (Food, Fashion, Furniture and “Ferrari”), are now flanked by the robotics, mechatronics, biopharmaceuticals and aerospace sectors. In fact, presently Italy is a leading exporter of manufactured goods and machinery equipment, in additional to pharmaceutical products, yachts and fashion products.


The main exporting destinations for Italy have been France, Germany and the US (see chart below) and have mostly included industrial machinery, road vehicles & transport equipment, ores and metals, chemicals and other products (See table below). It is worth highlighting, that in recent years, the country’s goods exports, have increasingly been oriented to non-EU countries.

In 2015, Italy exported about €414 billion worth of products, representing about 2.5% of the overall global exports.

On the other side, Italy ranks as the 6th largest importer worldwide, with Germany, France and China as its major trade partners (See chart below). Imports mainly include, mining and quarrying products, basic metals & fabricated metal products (excluding machinery and equipment), chemicals, transport equipment, as well as food, beverages & tobacco (2013 data).

More specifically, the country imports Fuels, Office, Telecom & electrical equipment, Road vehicles & transport equipment, Basic food & food products and Industrial Machinery.

In 2015, the improved labour market and financial conditions, boosted the domestic demand. Therefore, imports increased by 6%; exports followed the same trend, growing by 4.3% –reaching the highest value in the last decade. In the same year, Italy had a €45.2 billion surplus (in goods), compared to the €41.9 billion, in 2014.

In the services sector, in 2013 there was a trade surplus of €3 billion, as a result of a significant decrease of imports and a respective increase of services exports –compared to an €8.6 billion deficit in 2008.

According to estimations, in 2016, imports of goods and services are expected to grow by 2.3%, while exports will increase by only 1.7%.

Under the effects of the global economic crisis, unemployment has considerably increased the last few years. However, for the first time after seven consecutive years of rises –reaching a record high of 12.7% in 2014-, the unemployment rate decreased to 11.9%, in 2015. Governmental reforms indicate that the unemployment level will be further reduced in the coming years.

In 2008, Italy had a negative FDI inflow, mainly due to a liquidity crisis in financial markets, as well as the protracted issues affecting financial institutions. This trend was not confronted, particularly in Italy, but also in the majority of the developed world, with an average drop off of the FDI of 33%, compared to the previous year. Since then, foreign direct investments in the country have demonstrated various fluctuations, reaching US 34.8 billion (€31.3 billion) in 2012, only to decrease to US 13.7 billion (€12.3 billion) in 2014.

On the opposite direction, boosted by inter-company loans, FDI outflow from Italy, increased notably in 2013, to about US $32 billion (€28.8 billion).

As part of the FDI flows, last year (2015) Italy reached the highest value of Mergers & Acquisitions, since 2007. Some of the latest deals are illustrated in the Infographic below.


Moreover, realizing the new arising opportunities, as a result of the economic recovery, the Italian government has lately implemented a policy package, which includes new incentives for investment and mergers, approved in the 2016 Budget, as well as a new more certain and transparent regulatory framework. More specifically, in order to promote/stimulate investments, sector-specific policies through tax and other incentives, have been adopted –e.g. 50% tax credit on investment in Broad-Band networks, simplified procedures to access and exploit oil & gas resources. Moreover, 15% tax credit on machinery and capital goods investments, over the €10,000 threshold, 25-50% tax credit on additional investment in R&D, and 50% tax relief of revenues sourced from patents & trademarks (by 2017), will facilitate the transition to a friendlier for investments environment.

Finally, as a net contributor of funds to the European Union, within the latest economic crisis, Rome appears to be sceptical towards Brussels, under the pressure of continual requests for spending cuts. Considering that Italy has been in recession in five out of the last eight years of its presence in the Eurozone and the fact that its debt has increased significantly since 2008, to 132.6% of its GDP (2015), the Italian President’s doubts seem valid. In fact, the recently approved provision of cuts in tax measures to Italians, in the 2016 Budget, reflects this opposition towards EU austerity policies.