Bank of Italy – Presentation of the annual report for 2023 “The economy of Friuli Venezia Giulia”

The annual report “The economy of Friuli Venezia Giulia” is presented today in Trieste.

The macroeconomic framework

In 2023, economic activity in Friuli Venezia Giulia increased to a limited extent compared to the sustained growth rates of the previous two years, which had led the regional GDP to exceed the 2019 level by 3.4 percent in real terms (around 1 point more than Italy). According to the quarterly indicator of the regional economy (ITER), after signs of recovery in the first quarter, economic activity weakened in the following months. On average in 2023 the region’s product would have increased in real terms by 0.6 percent, a value slightly lower than the national one (0.9 percent).

Businesses

In the manufacturing sector, activity levels have fallen, affected by the sharp decline in exports, also disadvantaged by the sectoral and geographical specialization of regional companies. Capital accumulation, however, continued, supported by the purchases of capital goods which benefited from tax relief aimed at encouraging the technological and digital transition of production processes.

In the construction sector, production levels, although slowing, continued to grow at a rapid pace, benefiting from incentives for the renovation and energy requalification of buildings and from the strengthening of public investments. Transactions on the real estate market have dropped significantly, mainly due to the higher cost of credit; the positive dynamics of house prices has weakened.

In the tertiary sector, business growth has weakened considerably. The demand addressed to businesses in the trade and tourism services has lost strength: the slowdown in tourist presences, which had grown strongly in the two-year period following the pandemic, was associated with a modest dynamic in household spending. Transport services and port logistics were affected by the contraction in goods moved.

In 2023, the profitability of regional companies, which had improved in all sectors in the previous two years, was affected by the weakening of the economic situation and the increase in interest expenditure associated with the rise in rates.

In the first months of 2024, tensions regarding maritime trade in the Red Sea did not have significant repercussions, either on supply chains or on the production costs of regional companies. The effects of the crisis were instead reflected in a decline in container movement, which is the most used mode of transport for commercial traffic with Asia.

The labor market and families

In 2023, the expansion of employment that had characterized the previous two years was interrupted while the use of social safety nets resumed, reaching levels slightly higher than those of 2019. The increase in the employment rate is attributable to the contraction of the working age population, in connection with the demographic decline and the aging of the population which, based on Istat demographic projections, will continue in the coming decades.

Nominal household income growth weakened in 2023. The increase in prices, although attenuating during the year, led to a slight reduction in disposable incomes in real terms which have not yet recovered the 2019 level. Family consumption slowed down, affected by the decline in purchasing power .

Household bank deposits, after the strong accumulation in the pandemic period, have fallen; the reduction in on-demand liquidity contributed to this, which was counteracted by the increase in savings deposits, which were more profitable. The higher yields have also oriented savers’ preferences towards indirect funding instruments, especially government bonds and private bonds.

The credit market

Loans to businesses decreased, affected by the weakness of the demand for financing, which was influenced by the high cost of credit and the large availability of liquid resources accumulated in the previous two years.

The increase in interest rates has also weakened families’ demand for financing; the slowdown in consumer credit was associated with the decrease in new mortgages for the purchase of homes which fell by a quarter compared to the previous year.

Overall, credit risk remains at historically low levels.

Decentralized public finance

In 2023, the spending activity of the local authorities of Friuli Venezia Giulia was further strengthened. The growth in current spending, which was influenced by the greater outlays for personnel and for the purchase of goods and services, was associated with the strong expansion of the capital account component driven both by contributions to families, businesses and other local public bodies , and from greater investments.

The growth in investments, underway since 2021, was supported by the substantial resources available to local authorities for which, overall, the budget surplus has further improved, and by the interventions financed by the European structural funds and the PNRR. The implementation of the Plan in the region continued: at the end of last year, tenders were launched for an amount equal to approximately three fifths of the resources assigned to public operators for interventions requiring an award procedure; just under 70 percent of the amounts put up for tender had been awarded. A significant portion of the Plan’s resources is dedicated to investments in the healthcare sector; in the immediate future, despite the strengthening of the workforce in recent years, critical issues remain linked to the greater demand for personnel linked to these investments and the retirement of a significant number of professional figures.

 
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