The post-COVID recovery offers an exceptional opportunity for Italy to tackle long-standing obstacles to job creation
and the raising of living standards, according to a new OECD report.
The OECD’s latest Economic Survey of Italy says government support for Italian households and businesses hit hard by the COVID-19 pandemic should continue until
the recovery is firmly underway, but should become increasingly targeted as the economy continues to strengthen. It says
that generous fiscal support has been effective in mitigating job losses and preserving productive capacity. This will
help boost the short-term recovery as vaccination rates accelerate and restrictions ease. Higher public spending,
including from Next Generation EU funds, will support higher investment alongside improved confidence and demand.
The National Recovery and Resilience Plan offers a unique opportunity to create a greener, more digitised and productive
economy, the report adds. The government, it says, has an ambitious agenda rightly prioritising reforms to competition,
to boost the efficiency of civil justice processes and to reform the public sector in order to tackle uncertainty,
delays and costs that currently hamper investment. Green infrastructure and broadband investments can improve the
competitiveness of Italian firms.
The report suggests that the chances of implementing this reform plan successfully are greater than on previous
occasions. Clear implementation milestones and targets linked to the disbursement of Next Generation EU funds have been
publicised, while recently passed laws to simplify green investments and support decision-making will help facilitate
successful implementation of the plan.
The OECD projects Italy’s economic growth to be 5.9% this year and 4.1% in 2022, following an 8.9% fall in GDP in 2020.
A stronger-than-expected second quarter explains the upward revision from the 4.5% expansion forecast for 2021 in the
OECD’s May Economic Outlook.
Presenting the report alongside Italy’s Economy and Finance Minister Daniele Franco today, OECD Secretary-General
Mathias Cormann said: “Italy’s National Recovery and Resilience Plan is activating stronger, greener, fairer and more
digitised growth that will benefit all Italians with improved opportunities to get ahead. A more effective public sector
is crucial for ensuring its success. The plan must be fully implemented and complemented with reforms to support further
growth, including with more investment in green infrastructure and R and reforms to keep driving the effective digital transformation of the Italian economy.”
The report recommends that once the pandemic subsides, public spending and tax policy must be reformed to complement the
National Recovery and Resilience Plan. Currently, pension-related expenses crowd out investment in infrastructure,
education and training, penalising the young, many of whom are out of work and at risk of poverty.
Labour force participation remains particularly low for women, especially those with children. Access to quality
childcare and adult skills training needs to be improved across all regions, the report says.
Compared with the OECD average, taxes on labour remain too high. The report recommends implementing comprehensive tax
reform to reduce the complexity of the system and to lower labour taxes. This should be financed through improved
compliance – driven by greater use of technology and card payments.
Raising the effectiveness of Italy’s public sector is more urgent than ever. The report says that fully implementing the
National Recovery and Resilience Plan will help fill skills gaps in the public sector, further its digitisation and
reduce regulatory barriers that inhibit civil servants’ ability to deliver.
The report welcomes the set up for the Plan’s implementation. The administration would generally become stronger and
more agile by reducing the number of existing rules, regulating the services sector and green economy with a stronger
focus on outcomes, in line with the government’s priorities and that support sustained growth. The report also
recommends encouraging better coordination across Italy’s multiple layers of government.
An overview of the Economic Survey of Italy, with the main conclusions, is accessible on the OECD’s web site at: http://www.oecd.org/economy/surveys/italy-economic-snapshot/.
Download the full report in English or in Italian.