Report on the

ITALIAN COMPETITIVENESS
OVER THE LAST
TWO DECADES
Trade and international firm development
23.05.2024

GRAZIA AMOROSO
GIULIA MAZZOCCHI
Abstract

The report "Analysis of Italy's Competitiveness (2004-2022)" offers a detailed assessment of the country's
competitive position in a rapidly evolving international context. During the period examined, Italy faced
significant challenges, including increasing pressure from international competition, especially from
emerging economies. However, the country maintained distinctive strengths in the manufacturing
sector, design, and luxury sector.
The report highlights the need for greater investment in innovation, digitalization, and cost
competitiveness to ensure sustainable economic growth. Infrastructure progress, including
improvements in transportation networks and digital infrastructure, has contributed to enhancing
connectivity and ease of doing business in Italy.
To maintain and strengthen its position in the global economic landscape, the report emphasizes the
importance of targeted policies that promote innovation, education, and vocational training, simplify the
regulatory framework, and foster collaboration between the public and private sectors.
The Constant Market Share analysis provided insights into the factors influencing changes in Italian
exports in the international context.
The report provides a comprehensive overview of Italy's competitiveness during the period under
review, identifying the challenges and opportunities that the country must address to maintain and
enhance its position in the global economic landscape.
“Italian competitiveness over the last two decades”

WORLD
ECONOMIC
framework

GRAZIA AMOROSO
GIULIA MAZZOCCHI
2004-2007

Pre-Crisis Economic Outlook:

GDP (in mld USD)
Analysis of Economic Growth (2004 - 2007)

From 2004 to mid-2007, the global economy

experienced a period of robust growth characterized
by favorable macroeconomic conditions.
Advanced economies like United States, the
European Union, and Japan had moderate but
consistent growth. Emerging markets like China,
India, Brazil, and many countries in Asia and Latin
America grew much faster.
Since 2004, the European Union, China, and the
United States have been the top global players in
international trade.
Many investors directed foreign direct investments
(FDI) to emerging markets because these countries
had opportunities for rapid economic growth and
access to many natural resources.
FONTE: elaborazione personale su dati estratti dal
database della World Bank
2007-2009

Global Financial Crisis

GDP (in mld USD)
From the second half of 2007 to 2009, the
international economy was dominated by the global
financial crisis.
This crisis started in the United States, in 2007, with
the collapse of the housing market, causing bank
failures, economic recession, and rising
unemployment.
In 2008, the financial crisis began to show, and
reached a critical point in September 2008 with the
bankruptcy of Lehman Brothers.
In 2009, the GDP changes were widely negative
around the world. The slowdown in economic
activity and the decrease in global demand for
goods and services led to a collapse in world trade.
Because of the financial crisis and economic
recession, foreign direct investments (FDI) dropped
sharply, causing a flight of capital to safer places. FONTE: elaborazione personale su dati estratti dal
database della World Bank
2009-2015

Economic Recovery Post-Crisis:

period 2009-2015 GDP (in mld USD)

From 2009 to the first half of 2015, there was a

period of post-crisis economic recovery.
The Eurozone faced serious difficulties due to
the sovereign debt crisis, negatively affecting its
GDP and the overall GDP.
Many emerging economies like China, India,
and Brazil used internal demand and investment
to support their economic growth, contributing
significantly to global GDP growth.
After the financial crisis, starting from 2010,
there was a gradual increase in international
trade and foreign direct investments (FDI),
mainly towards emerging markets.

FONTE: elaborazione personale su dati estratti dal

database della World Bank
 2015-2019

Post-Crisis Trends and Increased Economic

Uncertainty: The Period 2018-2019
GDP (in mld USD)
From 2015 to 2017, the international economy was influenced by
several factors, including Brexit, which created significant political and
economic uncertainty not only in the UK but also in Europe and
beyond.
Emerging countries like China, India, Russia, and Brazil continued
to be the main drivers of global growth.
Uncertainty about medium-term economic prospects and
geopolitical tensions had a significant impact on international
relations and global stability, and led to a decrease in FDI.
From 2017 to 2019, the global economy showed signs of slowing down
due to various factors such as:
Oil price fluctuations
Trade tensions between the US and China,
Brexit
Crises in Latin America and the Middle East.
The global economic slowdown directly impacted world trade,
affecting exports and imports between countries.
During these years, FDI increased with significant variations between FONTE: elaborazione personale su dati estratti dal
database della World Bank
regions and sectors.
 2020-2022

Economic impact due to COVID-19 cirisis:

analysis of the period 2020-2022
GDP (in mld USD)
From 2020 to 2022, the international economic trend was
strongly influenced by the COVID-19 pandemic and its
effects, leading to a global GDP collapse.
Economies started adapting to the new conditions
imposed by the pandemic, resulting in increased
digitalization and online services.
World trade was particularly affected, with a decrease in
trade volumes due to restrictions on imports and exports
and reduced global demand.
In 2022, the European Union faced its most severe energy
crisis in decades due to reduced gas flows from the Russian
invasion of Ukraine.
The consequent rise in energy prices and the negative
effects of the pandemic further decreased the EU's GDP
growth.
Despite a significant drop in FDI in many parts of the FONTE: elaborazione personale su dati estratti dal
world, sectors like technology, healthcare, and renewable database della World Bank

energy continued to attract FDI during the pandemic.

“Italian competitiveness over the last two decades”

EUROPEAN
UNION
and its main
trade partners
GRAZIA AMOROSO
GIULIA MAZZOCCHI
 European Union

The European Union (EU) is one of the

world's largest economies, with a GDP of
around 16.6 trillion EUR, playing a central role
in the global trade system.
The EU's economic openness has brought clear
benefits, with over 30 million jobs dependent
on foreign trade.
The EU has contributed to the development of
the international trade system by promoting
trade liberalization among its members and
with third countries.
Operating as a single actor in the World Trade
Organization (WTO), the EU negotiates trade
agreements and defends EU interests.
This graph shows us the volume of Europe’s
import and export with its major partners all
around the world, in 2009 and in 2019.
Both import and export increased in this
FONTE: Eurostat (online data code: ext_It_maineu)
decade, and EU extended its market share, and
consequentely its competitiveness.
“Italian competitiveness over the last two decades”

ITALY’S position
and
SPECIALIZATION
MODEL
GRAZIA AMOROSO
GIULIA MAZZOCCHI
Italy’s position

FONTE: elaborazione personale su dati estratti dal database FMI.

Italy experienced modest but steady economic growth during the period from 2004 to 2007, with an
average annual GDP growth between 1% and 2%, lower than many other European countries.
Italy's main trading partners were Germany, France, Spain, the United States, and China.
Italian exports continued to play an important role in world trade.
 Italy’s position

During the period from 2007 to 2009, the

Italian economy was hit by the global financial
crisis, with GDP declining and economic activity
slowing down.
According to the ATECO 2007 classification, a
coded system used to classify economic
activities based on their nature and type
adopted in various countries including Italy,
in 2009 compared to the previous year, there
were reductions in both the number of
companies and employment levels.
Italy's trade balance worsened due to a
decrease in exports and imports, driven by a
drop in both foreign and domestic demand
and reduced spending capacity of households
and businesses. FONTE: elaborazione personale su dati estratti dal database ISTAT.
Italy’s position

From 2009 to 2015, Italy began a path of economic recovery characterized by slow GDP
growth.
From 2015 to 2017, Italy went through a phase of moderate economic growth, influenced by
significant events like Brexit.
Facing the uncertainty of Brexit, many Italian companies sought to export outside the UK,
focusing on other international markets.
Italy maintained a significant presence in both emerging markets such as China, India,
and Latin American countries, and advanced markets such as the United States and
European Union countries.
Italy's trade balance continued to show a deficit during this period, although reduced
compared to previous years.
From 2017 to 2019, Italy continued to navigate a complex global economic context,
characterized by trade tensions and internal political uncertainties.
During these years, global trade was influenced by trade tensions such as those between
the United States and China, which created uncertainties in international markets.
Italy’s position

FONTE: Info Mercati Esteri, indicatori Italia 2024.

From 2020 to 2022, Italy experienced significant economic contraction, followed by a gradual
recovery process.
Lockdown measures and social distancing to contain the spread of COVID-19 caused
disruptions in production and economic activity, with negative consequences on GDP,
employment, and the trade balance.
Starting in 2021, Italy began a gradual economic recovery, leading to an increase in exports
and imports.
 Specialization model

Italy's specialization model indicates in which This index (RSCA) compares the sectoral
sectors Italy is particularly competitive and export share of a country with the global
specialized in the international market. sectoral share, assuming that a positive ratio
Traditionally, Italy has specialized in sectors between the two shares indicates a
such as fashion, automotive, food, and design. comparative advantage of the country in the
However, in recent years, it has also sector considered.
specialized in high-tech sectors like
pharmaceuticals and transportation. The The revealed symmetric comparative advantage
COVID-19 pandemic has also contributed to index (RSCA) ranges from -1 to +1, allowing for a
this change. more effective comparison between countries and
Due to the integration of production processes sectors compared to the Rca (Balassa) index.
and the distribution of different stages of Values below zero indicate a revealed
goods processing across various countries, comparative disadvantage;
traditional trade statistics suffer from Values above zero indicate a revealed
duplications caused by intermediate goods comparative advantage.
crossing national borders multiple times,
leading to an overestimation of the domestic To calculate this index:
value added in exports.
To address this problem, the ICE reports use
the revealed symmetric comparative
advantage index (RSCA).
 Specialization model

The analysis of the Rsca index in value added

confirms Italy's specialization in traditional
sectors like footwear and machinery.
However, there is a trend of decreasing
comparative advantage in some areas,
indicating greater reliance on foreign
intermediate goods.
Sectors such as paper and chemicals show
increasing specialization with higher
domestic value added compared to gross
data.
In contrast, sectors like coke and petroleum
products exhibit a greater comparative
disadvantage, with growing dependence on
foreign value added components. FONTE: Rapporto ICE 2016, Dell’Agostino, Nenci.
“Italian competitiveness over the last two decades”

QUANTITATIVE ANALYSIS:
THE CONSTANT MARKET
SHARE ANALYSIS
OF ITALIAN EXPORT
GRAZIA AMOROSO
GIULIA MAZZOCCHI
 Quantitative Analysis

The quantitative analysis is made using the Constant Market Share method.

FONTE: R. Di Pietro - Le quote di mercato delle esportazioni italiane un’analisi constant-market share.

Over the period of 1999-2010, Italy's global export market share slightly decreased from 3.82% to 2.78%.
This decrease was equally attributed to competitiveness and structural factors, and the second was
significantly impacted by the types of exported products.
The overall decrease resulted from competitiveness challenges and a mismatch between Italy's export
specialization and global demand trends, both in products and geography.
the Italian market share began to grow positively from 2013 onwards. The overall increase between
2010 and 2016, amounting to 0.12%, was entirely attributed to a positive structural effect (0.22%).
The recovery of Italian exports intensified in 2016, when their share reached the highest level since
2008 (2.9%).
 Quantitative Analysis

FONTE: ITALY - RECENT CHANGES IN EXPORT SHARES

Italy experienced a decline in its overall export share in 2022, primarily due to a negative
structural effect at the sectoral level.
Sectors where Italy has less specialization saw significant increases in their relative importance,
while traditionally strong sectors and traditional Made in Italy products declined.
This decline was attributed equally to competitiveness and structural factors.
Post-Covid, Italy's export performance has been notably robust, with foreign sales of goods
increasing compared to 2019.
Despite this, Italy's competitiveness showed a positive effect over the analyzed period,
particularly strong in 2021, though partly offset in 2022.
“Italian competitiveness over the last two decades”

PREVISIONS
AND
CONCLUSIONS

GRAZIA AMOROSO
GIULIA MAZZOCCHI
 Conclusions

Italy's competitiveness has faced periods of decline and recovery due to global challenges. Between 1999 and
2010, Italy's global export market share fell from 3.82% to 2.78% due to competitiveness issues and an export
structure misaligned with global demand. Despite a slight positive adaptation effect, Italy struggled to
compete effectively.
From 2010 to 2016, Italy's market share improved slightly due to a positive structural effect, with global
demand favoring traditional Italian products and modern sectors like pharmaceuticals and transport. The
euro's depreciation in 2015 had a negative impact, but the overall structural effect contributed positively to
growth.
Between 2017 and 2022, there was a renewed decline in Italy's export market share, especially in 2022. This
decline was driven by a negative structural effect at the sectoral level and commodity price dynamics.
Sectors like energy and refined petroleum products, where Italy has less specialization, gained importance,
while traditionally strong sectors like mechanics and pharmaceuticals declined. Fluctuating commodity
prices, particularly energy, negatively affected Italy's competitiveness in these areas.
Despite these challenges, Italy showed a positive competitiveness effect, particularly post-Covid. In 2021,
Italy's exports increased by 9.6% in volume compared to 2019, outperforming the EU, euro area, and major
European economies. This positive effect helped break a three-year decline and highlighted the resilience of
Italian exports.
In conclusion, Italy has demonstrated adaptability and improved competitiveness despite global challenges,
finding new market opportunities and enhancing its performance in international trade.
 “Italian Competitiveness over the
last two decades”

THANKS FOR YOUR ATTENTION

Grazia Amoroso
Giulia Mazzocchi