The annual report “The economy of the Aosta Valley” is presented today in Aosta.
The big picture
In 2023 the Aosta Valley economy continued to grow, but at a slower pace than in the previous two years. The Bank of Italy’s regional economy indicator (ITER) increased by 0.9 percent, in line with the Italian average and slightly lower than in the North West. The expansion, which was relatively stronger in the first quarter of the year, subsequently moderated.
Businesses
In industry, the dynamics of activity progressively weakened, affected by the decline in foreign demand, until it became negative in the last part of the year. In the construction sector the trend was still positive, supported in private construction by the acceleration of works in view of the reduction of tax incentives and in public construction by the implementation of investments linked to the National Recovery and Resilience Plan (PNRR). In services, the expansion phase continued, although at lower rates than the previous year. The further increase in tourist flows, particularly from abroad, contributed to this, with positive repercussions on the revenues and profitability of the sector. Transport also benefited from the development of tourism, although in the last part of the year, in connection with the closure of the Mont Blanc tunnel for maintenance work, vehicle traffic on the region’s motorway networks slowed down. Our analyses, conducted on tunnel closure episodes that occurred in the past, suggest that these have relatively limited repercussions on the economy of the Aosta Valley.
Capital accumulation activity continued during the year, driven above all by the tertiary sector and larger companies.
In 2023, the birth rate of businesses increased, while the mortality rate remained substantially stable. Among the companies established between 2014 and 2019, those capable of achieving high growth rates are less widespread in the region than in the rest of the country, while a significant role for local development is played by companies that are part of multinational groups. In Valle d’Aosta the latter contribute significantly to the regional economy in terms of added value, employment, exports and patenting activity.
Bank loans to non-financial companies decelerated during 2023. The slowdown in loans to the manufacturing and energy sectors, which increased very markedly in 2022, was associated with a reduction in credit to the construction and services sectors, albeit more limited compared to the previous year. However, the decline in loans to smaller companies has accentuated.
The slowdown in loans to businesses reflected both the application of more prudent offering criteria by intermediaries and the contraction in demand, also due to the increase in the cost of credit, following the increase in official monetary policy rates. This resulted in a significant growth in the cost of bank debt, due to the high share of variable rate loans; however, the impact on the Aosta Valley production sector was mitigated by a relatively solid financial structure. In the last part of the year, signs of a worsening in credit quality emerged, especially concerning service and construction companies and small-sized ones; the indicators however remain at historically low values.
The labor market and families
The number of employed continued to rise, thanks to the contribution of the construction and services sectors. The increase, more marked than in the rest of the country, concerned both employees, especially in the permanent component, and self-employed workers. With the expansion of labor demand, the unemployment rate continued to decline.
The dynamics of the Aosta Valley labor market have been strongly influenced by demographic trends: between 2007 and 2023 the workforce grew to a limited extent, affected by the significant reduction in the population. The migratory flows of foreign citizens, less significant than the rest of the country, have provided a positive contribution to the demographic dynamics, only partially offsetting the decline in the Italian population, which has also been affected by migrations abroad.
In 2023, the favorable employment trend continued to support the nominal income of Aosta Valley families, but inflation still eroded their purchasing power, which remained overall stable. Consumption has decelerated, although it is significantly higher than the levels before the pandemic crisis. The price increase had a stronger impact on the spending of families with older members, also in connection with the greater incidence of energy costs in their consumption basket.
Over the year as a whole, bank loans for the purchase of homes decreased, only partially offset by the expansion of those disbursed by the regional finance company. The contraction in sales and a lower use of debt for the purchase of a house contributed to the decline. Consumer credit, however, accelerated, especially due to the strengthening of financing for the purchase of motor vehicles. The quality of credit to families improved slightly.
The bank deposits of Aosta Valley families, after three years of expansion, have fallen, also due to a recomposition of the portfolio from current account assets towards more profitable assets, especially bonds and government securities.
Decentralized public finance
Current spending by Aosta Valley authorities has started to grow again, supported by higher costs for personnel and some services. Among these, healthcare spending has strengthened, driven above all by the directly managed component and to a lesser extent by that under contract; the costs for external healthcare collaborations and consultancy have further increased. Capital expenditure increased as a result of the greater contributions to businesses and fixed investments, over half of which were made by the Municipalities, partly in relation to the projects included in the PNRR. With reference to the missions into which the Plan is divided, the one dedicated to the green revolution and ecological transition and that aimed at digitalisation, innovation, competitiveness, culture and tourism take on particular importance in the region, whose resources also aim to expand the offer of services digital programs of local administrations in favor of families and businesses. The funding provided by the PNRR is also supported by that deriving from cohesion policies, with a view to complementarity and additionality.
The forecast for 2024 and future expectations
Based on preliminary indications, expectations relating to economic activity for the current year remain positive, at low levels. Manufacturing and service companies in the Bank of Italy’s sample, interviewed at the beginning of 2024, formulated moderate growth expectations for the current year, along with indications of a decline in investment activity. In the tertiary sector, in particular, expectations were influenced by the very favorable trend of the winter tourist season, which continued beyond the usual deadline. In construction, the climate of confidence among companies remains positive: the reduction in tax incentives in the private sector would be compensated by the acceleration of the works planned under the PNRR.
Added to the uncertainty linked to the possible worsening of international tensions are further critical issues deriving from demographic changes. The forecasts formulated by Istat for the Aosta Valley predict a decline in the population over the next twenty years, more intense than the Italian average, which could potentially lead to problems of generational turnover and finding workers. At the same time, the increase in the share of the older population requires services and adequate assistance to which the PNRR in particular seeks to provide a response. However, in achieving the objectives of the Plan it is necessary to take into account a shortage of healthcare personnel that is already present today and which will further worsen in the immediate future due to retirement leavers.
