The annual report “The economy of Veneto” is presented today in Venice.
In 2023, regional economic activity progressively weakened, affected by the slowdown in global trade, high interest rates and the erosion of households’ purchasing power. Despite the resilience shown by the production and financial system and the recovery of tourism demand, the uncertainty associated with the economic prospects and geopolitical tensions remains high.
The macroeconomic framework
In 2023, according to the quarterly indicator of the regional economy (ITER) developed by the Bank of Italy, the regional product would have grown in real terms by 1.1 percent, substantially in line with the national figure (0.9), but a sharp slowdown compared to the previous year (4.9 percent).
Ven-ICE, the indicator developed by the Bank of Italy to measure the underlying dynamics of the Veneto economy, signaled a decrease in economic activity in the second half of the year; in the first three months of 2024 the indicator returned positive.
Businesses
In 2023, regional manufacturing production, after two years of post-pandemic recovery, progressively weakened, affected by the decline in foreign and domestic orders, and decreased by 2.0 percent compared to the average of the previous year. Production activity grew in mechanics, stagnated in food and beverages, and decreased in the other main sectors and in particular in the fashion system. The turnover at constant prices of regional industrial companies also decreased. The prices charged by companies, after two years of strong growth determined above all by the increases in prices of energy and other raw materials and semi-finished products, have significantly slowed down. In a context of high economic and geopolitical uncertainty and rising interest rates on loans, industrial investments have reduced, although less than what companies had planned at the beginning of 2023. On average for the year, exports of goods in volume decreased more intensely than the potential foreign demand addressed to Veneto companies, due to a stronger decline than that of demand in markets outside the monetary union. In the first quarter of the current year, manufacturing production continued to decline in trend terms, albeit at a more moderate pace than in previous periods.
In 2023, construction sector activity grew, continuing to benefit from tax incentives for the redevelopment of housing stock. The public works sector benefited from the progress in spending for the implementation of the interventions of the National Recovery and Resilience Plan (PNRR).
The recovery of tourist presences in accommodation facilities has been completed, thanks to the positive contribution of foreign travellers; overnight stays by Italian tourists, although recovering, were still slightly lower than in 2019.
Despite the economic slowdown and the increased cost of debt, in 2023 the economic results of Veneto companies remained positive. The increase in the cost of bank debt was nevertheless marked, due to the monetary restriction and the high share of the variable rate component. However, companies have faced the increase in the cost of credit with a more solid financial structure than in the past, thanks to the lower level of debt, greater profitability and the high availability of liquid reserves.
Loans to businesses fell significantly, affected by the increase in rates, the lower financing requirement linked to the weakness of economic activity and still selective credit access conditions.
Demographic evolution
Over the last decade, the reduction of the population in Veneto has been associated with progressive ageing, determining significant effects on the job market and on economic growth. If in other European regions with a manufacturing vocation this impact was more than compensated by the strong increase in productivity, in Veneto and Italy the demographic decline was instead associated with the decrease in productivity, contributing to the low growth in GDP per capita recorded in the last twenty years. For territories such as Veneto, affected by a reduction in population, it is important both to maintain, attract and train specialized human capital and to achieve greater female participation in the labor market. As regards the first aspect, Veneto presents a positive balance between entries and exits of graduates to and from other Italian regions but a negative balance in relations with foreign countries like the rest of the country. With reference to the second aspect, the female activity rate is growing in the region, but still remains significantly lower than the male one.
The labor market and families
Employment growth continued in 2023. All sectors, with the sole exception of the agricultural sector, benefited from the increase, which affected women more markedly. The balance between activations and terminations of job positions in the private non-agricultural sector was positive and stable compared to the previous year.
Inflation, while remaining high in historical comparison, gradually fell during 2023 and in the first months of 2024. According to the regional indicators developed by the Bank of Italy, in 2023 in real terms the incomes of Veneto families would have fallen slightly and the consumption slightly increased; the variations appear substantially in line with those of the country and the North East.
The growth in the cost of borrowing was reflected in a slight reduction in loans to consumer families. New mortgage disbursements fell sharply, while those relating to consumer credit increased compared to the previous year. The average interest rate on outstanding loans for the purchase of homes continued to grow in 2023. In a context of rising interest rates, from 2022 Veneto families have revised their preferences for using their savings in favor of more profitable tools.
The credit market
The volume of bank loans to the non-financial private sector recorded a decline, affecting those disbursed to businesses to a more pronounced extent. The quality of bank credit remained satisfactory overall; if on the one hand the rate of deterioration of loans to businesses increased moderately, on the other hand that relating to loans to families remained substantially unchanged.
Decentralized public finance
The Veneto local authorities have maintained overall good financial condition. Spending has increased, particularly capital spending; this was affected by investments in public works, mainly made by the Municipalities, in connection with the implementation of the PNRR. Health spending also increased, which was influenced by the growth in personnel spending. Despite the strengthening of the workforce in the Veneto healthcare system over the last few years, however, there are critical issues linked to the retirement of a significant number of professional figures and the greater need for personnel necessary to guarantee the operation of the structures envisaged by the PNRR.
