FVG – The Bank of Italy’s report on the economy of Friuli Venezia Giulia was presented in Trieste and Udine. The director of the Trieste branch of the Bank of Italy, Marco Martella, illustrated the details.
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In 2023, the economy of Friuli Venezia Giulia grew moderately compared to the strong increases of the previous two years, when the regional GDP (gross domestic product) exceeded 2019 levels by 3.4% (around 1 percentage point in more than the Italian average).
According to the quarterly indicator of the regional economy (ITER), after a positive first quarter, economic activity decreased in the following months. On average, regional GDP grew 0.6% in 2023, slightly less than the national growth of 0.9%.
Businesses
In the manufacturing sector, activity declined due to the decline in exports. However, investments in capital goods continued, thanks to tax incentives for the technological and digital transition.
The construction sector continued to grow at a good pace, although slowing down, thanks to incentives for the renovation and energy requalification of buildings and public investments. However, real estate transactions have fallen due to the higher cost of credit, and the increase in house prices has moderated.
In the tertiary sector, growth has slowed. Demand for commercial and tourism businesses has declined, with a decline in tourist attendance and weak household spending. Port transport and logistics services were also affected by the reduction in goods moved.
Profitability of regional businesses, which improved in the previous two years, suffered a decline in 2023 due to the unfavorable economic environment and increased interest expenditure due to rising rates.
In early 2024, tensions in the Red Sea did not significantly affect supply chains or production costs, but reduced container traffic.
The labor market and family income
In 2023, job growth stalled and the use of social safety nets increased slightly compared to 2019.
The increase in the employment rate is not due to economic reasons but to factors linked to the structure of the population, such as the decrease in people of working age, linked to the demographic decline, and the aging of the inhabitants of Fvg, which according to estimates will continue in the coming decades.
Nominal household income grew less in 2023. The increase in prices slightly reduced real incomes, which have not yet recovered to 2019 levels. Household consumption slowed due to the decline in purchasing power.
Household bank deposits fell after accumulating during the pandemic, with a reduction in overnight liquidity and an increase in savings deposits. Savers have turned towards financial instruments with higher yields, such as government bonds and private bonds.
The credit market
Loans to businesses decreased, influenced by the weak demand for financing due to the high cost of credit and the availability of liquidity accumulated in the previous two years. Household demand for financing also fell due to high interest rates, with a decrease in new mortgages for the purchase of homes, reduced by a quarter compared to the previous year. Overall, credit risk remains low.
The finance of local authorities in FVG
In 2023, the spending of Friuli Venezia Giulia’s local authorities increased further. Current spending grew due to increases for personnel and for the purchase of goods and services, while capital spending increased thanks to contributions to families, businesses and other local public bodies, and to investments.
The growth in investments, which began in 2021, was supported by the available resources and by the European structural funds and the PNRR. By the end of 2023, around three-fifths of the resources allocated to public bodies had been tendered, with almost 70% of the amounts awarded. A significant part of the resources is allocated to investments in the healthcare sector, which still presents critical issues due to the demand for personnel and retirements.
