1.
Trento Branch
Economic Analysis and Research Division
14 December 2022
The economy of the autonomous Provinces
of Trento and Bolzano:
Business cycle update

2.
Table of contents
Business cycle update to Q2-Q3.2022; comparison with Q4.2021.

3.
Editorial Team
Antonio Accetturo (coordinator),
Michele Cascarano, Sara Cecchetti, Petra Degasperi, Andrea
Locatelli, Francesca Modena, Silvia Spadafora
Editorial assistance: Sara Garbin, Isabella Martinelli, Silvia
Spadafora

4.
This presentation in a snapshot
1. Economic recovery still strong in the first part of 2022
2. Increase in the cost of credit and persistent uncertainty →
decrease in the demand for business loans
3. The economic and financial conditions for firms and
households remain overall solid → limited impacts on credit
risk
4. Forecasts of a slowdown in the final part of the year and for the
first months of '23:
• High macroeconomic uncertainty
• Increased production costs
• Erosion of household purchasing power

5.
Agenda
 The economic situation in the first part of the year
 Economic outlook for the coming months

6.
Agenda
 The economic situation in the first part of the year
 Economic outlook for the coming months

7.
Macroeconomic outlook
In the first part of 2022, GDP continued to grow, recovering
pre-Covid levels
Calculations based on Istat, MEF, Ispat and ASTAT data.
For Italy: the forecast for 2022 is from MEF.
Italy Trentino South Tyrol
2021 +6,7% +6,9% +6,5%/+7,0%
2022 +3,7% +3,7% +3,0%/+3,5%

8.
Manufacturing, export and investments
• Sales and hours worked for manufacturing
growing in the first 9 months of the year.
• Increase in export volumes (higher in
Trentino than in S. Tyrol).
• Investment prospects confirmed, with
modest growth
• Difficulties in procuring raw materials and
intermediate inputs remain pervasive.
• Impact of higher energy prices lower than
the Italian average.
Export growth rate
(percentage change over 12 months at constant prices)
Source: Istat.

9.
Construction and private services
• Construction: persistent growth in Trentino (with the support of public
subsidies); stability in S. Tyrol (after a period of strong expansion).
• Strong growth in the tertiary sector: recovery from the winter season '21-
'22 Overnight stays
(percentage changes and percentage points)
Source: Ispat, Astat.
(a) provincia di Trento (b) provincia di Bolzano

10.
The financial situation of firms
• Overall good… but the share of firms satisfied with their profitability is decreasing both in
Trentino and in S. Tyrol
• The liquidity ratio – historically high – is decreasing due to the greater need of working
capital (increase in input costs)
Liquidity ratio
(Billions of euro and percentage points)
Source: segnalazioni di vigilanza e Centrale dei rischi.
(a) provincia di Trento (b) provincia di Bolzano

11.
Slowdown in bank credit to firms
• Trentino [2022Q2]: +2.0% (from 4.4 in 21Q4); -3.8% small firms
• S. Tyrol [2022Q2]: +1.0% (from 3.0%); -1.5% small firms
• Increased cost of credit. Interest rate for investment needs at
2.19% in Trentino and 1.90 in S. Tyrol
Bank loans by firm size
(percentage change over 12 months)
Source: segnalazioni di vigilanza.
(a) provincia di Trento (b) provincia di Bolzano

12.
Labour market and household consumption
• Employment increase in the first
half: +5.4% in Trentino, +8.9% in
S. Tyrol (+3.6% in Italy). Positive
dynamics also in the summer
months.
• Unemployment decrease and
participation in the labor market
growth (especially for women).
• Household consumption
expected to increase in 2022…
• …but inflation increase larger
than IT average!
Employment
(percentage change)
Source: Istat, RFL.

13.
Loans to households
• Trentino [2022Q2]: +4.9% (from 6.2 in December)
• S. Tyrol [2022Q2]: +7.0% (from 6.5%)
• Interest rate for new house mortgages just over 2% (+30bp in
Trentino and +40bp in S. Tyrol)
Loans to households
(percentage changes and contributions to growth rates)
Source: segnalazioni di vigilanza.
(a) provincia di Trento (b) provincia di Bolzano

14.
Credit market
• Loans to non-financial private
sector : +2.6% in Trentino;
+2.7% in S. Tyrol.
• Trentino: greater dynamism of
non-regional banks than
regional ones.
• S. Tyrol: similar trends for both
bank types.
• Credit quality (current and
perspective) overall stable
Stage 2 loans to firms
(percentage values)
Source: AnaCredit.

15.
Agenda
 The economic situation in the first part of the year
 Economic outlook for the coming months

16.
Expected deceleration in the industrial sector
• The supply bottlenecks will persist
beyond 2023Q1
• Slowdown in revenues and hours
worked
• More pronounced in S. Tyrol → links
with the German economy
• Increases in production costs will
impact on the financial sustainability
• Deteriorating investment conditions
Revenues of industrial companies
(percentage values)
Source: Calculations on Sondtel survey data. Banca d’Italia.

17.
Constructions and services
Constructions
• The sector most affected by the supplybottlenecks.
• It could benefit from the investments of the National Recovery and
Resilience Plan
Services
• Increase in production costs will impact on the economic and financial
sustainability of companies
• Effects of price increases on household purchasing power (also for
tourism consumption)

18.
Trento Branch
Economic Analysis and Research Division
14 December 2022
The economy of the autonomous Provinces
of Trento and Bolzano:
Business cycle update