Italy is a beautiful country full of golden sunshine and rolling hills that support vineyards and olive groves. It is also a modern industrial country at the forefront of fashion, consumer goods and construction. Italy became a democratic republic in 1946, but it has always been among the leaders of political and economic movements in Europe. It was a charter member of NATO and the European Union as well as its subsequent iterations. Italy is the third-largest economy in the European Union, but it faces structural economic challenges such as high debt and an inefficient labor market.
Italy, with its capital city of Rome, is located in Southern Europe on a peninsula extending into the Mediterranean Sea. It has 20 regions and five autonomous regions. Border countries include Austria, France, Vatican City, San Marino, Slovenia and Switzerland. At 301,340 sq km, it is about twice the size of the US state of Georgia.
Manufacturing in Italy
Italy is the second largest manufacturing country in Europe, behind Germany. Much of Italy’s industry is clustered in the northern part of the country, while the agricultural sector is located in the south. Much of Italy’s industry focuses on high-quality consumer goods and luxury brands, many produced by small, family-owned and mid-sized companies.
Typical manufacturing products made in Italy include fabricated metal products; machinery and equipment; food, drink and tobacco; rubber and plastics; chemicals; ceramics; non-metallic mineral products; clothing and textiles; leather goods; footwear; and motor vehicles and transportation equipment.
Manufacturing accounts for 24% of the country’s GDP, and industrial production is growing at 2.1% annually as of 2017.
Other Important Industries
Although Italy is famous for its food, wine and olive oil, agriculture makes up only 2.1% of the GDP and employs just under 4% of the workforce.
Tourism is one of Italy’s most important industries, and Italy is the fifth most popular place for visits from other countries. In fact, more than 63 million tourists visited Italy in 2018 to see its unparalleled ancient monuments, numerous World Heritage Sites and to experience its rich culture.
Supply Chain Infrastructure for Manufacturing
Transportation options are abundant and of good quality in Italy. Coupled with its advantageous location, this makes Italy an excellent location for manufacturing supply chains. The navigation throughout Europe is excellent and Italy also has easy access to Asia, the UK and the US.
Italy has more than 129 airports, the bulk of which can handle cargo. Annual freight traffic was 945,433,732 mt-km in 2015. In addition to airports, Italy has five heliports for quick trips or small item deliveries.
Italy has 20,182 km of rail track and 487,700 km of roadway, so moving by rail or road is also fast and efficient.
Although there are some inland waterways, they are less efficient than Italy’s rails and roads for moving goods. The country has seven major seaports: Augusta, Cagliari, Genoa, Livorno, Taranto, Trieste and Venice. Genoa and Gioia Tauro are container ports, and there are three additional LNG ports and two additional oil terminals.
Italy has experienced a high unemployment rate in recent years with the current rate at just over 11%, and some demographics are as high as 37%. The workforce numbers 25.94 million, and most of those workers are well-educated. The average person in Italy completes 16 years of education, and more than 99% of the population is literate.
Industry employs 28.3% of the workforce, while the services industries employ 67.8%.
Italy’s GDP of $2.263 trillion puts it in 12th place in the world. Industry accounts for 23.9% and services for 73.9% of the GDP.
Italy imported $432.9 billion worth of goods in 2017. Its main partners were Germany, France, China, Netherlands, Spain and Belgium, and the primary commodities imported included engineering products, chemicals, transportation equipment, energy products, minerals, non-ferrous metals, textiles, clothing, food, beverages and tobacco. Italy ranks 13th in the world for imports.
Italy is one of five countries with an export trade surplus. Exports totaled $496.3 billion, and included engineering products, textiles and clothing, production machinery, motor vehicles, transportation equipment, chemicals, food, beverages, tobacco, minerals and non-ferrous metals. Primary export partners were Germany, France, US, Spain, UK and Switzerland.
The chief of state is president Sergio Mattarella, and the Prime Minister is Giuseppe Conte. Elections occur every seven years. The president is indirectly elected by the electoral college.
Taxes make up 46.6% of the GDP and require 14 payments per year. The actual tax and contribution rate is 59.1% of profit. Profit tax is 14.6%, labor and contribution is 42.9% and other taxes account for 1.6% of overall profits.
Starting a business in Italy may be slightly more complicated than in some other European countries. The World Bank puts it in 58th place globally as far as the ease of starting a business there. Dealing with construction permits, getting credit, and paying taxes are three areas that may present challenges. Italy also ranks low in enforcing contracts. However, this is offset by its first place ranking for trading across borders and high marks for registering property, getting electricity, protecting minority investors and resolving insolvency.
Getting Down to Business
Doing business in Italy can be both rewarding and profitable, despite a few challenges. It is, however, important to note manufacturing’s pivotal role in the Italian economy. QAD Adaptive ERP can help manufacturers to rise to meet the challenges of fast moving industries and economic conditions, while QAD Internationalization helps to identify and overcome the challenges associated with taxes, regulations and globalization.
How would you describe the state of Manufacturing in Italy? Learn more about manufacturing and doing business in other great countries around the world.