Italy has the ninth largest economy in the world with a GDP of approximately €1.48 trillion. The Italian economy is expected to contract by 1.8% in 2013 and grow by only 0.2% in 2014. Business confidence remains fragile in Italy, with just 16% of businesses expecting revenue to increase in the next 12 months. Economic uncertainty, bureaucracy, and low demand are constraining business expansion. Restoring competitiveness is a challenge as Italian businesses have been slower to lower costs than Spain.

1. Focus on: Italy
Grant Thornton International Business Report 2013

2. Focus on: Italy
Ninth
larges
econom
Introduction
globall
GDP
aproximately
€1.48
trillion
Italy is an advanced economy of more than
60m people. In 2012, its GDP was approximately
€1.48trn (US$2trn), making it the ninth largest
economy in the world.
htniN
Drawing on official data sources, such as
the Economist Intelligence Unit (EIU) and
the International Monetary Fund (IMF), and the
Grant Thornton International Business Report (IBR),
this short report considers the outlook for the
economy, including the expectations of 200
businesses interviewed in Italy, and more than
12,500 globally, over the past 12 months.
tsegral
ymonoce
yllabolg
Ninth
largest
Giuseppe Bernoni
Managing partner
Bernoni Grant Thornton
T +39 02 76 00 8751
E giuseppe.bernoni.it.gt.com
www.bernoni-grantthornton.it
economy
GDP
globally
aproximately
€1.48
Focus on: Italy 2

3. Providing services for
asset managers,
12.2%
fund administrators,
Focus on: Italy
hedge funds,
11%
as recog
by Wall S
special purpose vehicles
and mutual funds
6.6%
59.4%
5.4%
Economy
5.4%
The Italian economy continues to struggle with the fallout from the
eurozone sovereign debt crisis, with a contraction in Q2 marking the
12.2%
eighth straight quarterly decline.
Bond yields have fallen since peaking at
7% in late 2012 but political uncertainty
following the inconclusive election at the
beginning of 2013 and the sentence for
tax evasion handed down to the leader of
the centre-right, Silvio Berlusconi, have
12.2%
12%
unemployment
rate
Export destinations (2012)
Germany
11%
France
US
6.6%
59.4%
60
of our memb
top cli
operate in financ
Economy expected
12.2%
11%
seen yields rise back above Spain’s for
the first time since March 2012. Italy
11%
6.6%
remains a world leader in sectors such
59.4%
as engineering and fashion but high unit
5.4%
6.6%
59.4%
labour costs have prevented rising5.4%
exports
5.4%
offsetting the negative impact of declining
domestic demand.
5.4%
Over
5.4%
5.4%
Spain
UK
Other
to contract by
1.8%
in 2013
0.2%
forecast growth
in 2014
Key Indicators
• the economy contracted by 0.2%
in Q2 from the previous quarter,
a 2.1% year-on-year contraction
• the yield on ten-year bonds climbed
to 4.5% in September, up from 4.2%
in August
• exports rose by 0.2% in the first seven
months of the year compared with the
same period in 2012
• imports fell by 6.0% over the
same period, widening the surplus
to €18.2bn (US$24bn), up from
€4.2bn in the same period of 2012
• the unemployment rate reached
12.2%
in major markets
an all-time high of 12% in May, the
highest since records began in 1977,
Combined out of11%
with the number of people global
work now more than double the
6.6%
pre-crisis average.
59.4%
Ranked in
the top 6
revenues of
$300m
5.4%
in financial services
5.4%
2012
Australia
Import originations (2012)
remains a key
trade partner
Economy expected
15.9%
Germany
8.5%
58.1%
One of the
‘large six’
7.7%
4.5%
5.3%
France
China
Spain
Netherlands
Others
to contract by
1.8%
in 2013
0.2%
forecast growth
in 2014
global accountancy
Ranked in
Providing services for
the top 6
asset managers,
fund administrators,
hedge funds,
in major markets
special purpose vehicles
organisations
Australia
Source: Economist Intelligence Unit (2013)
as recognised
remains a key
by Wall Street
trade partner
Focus on: Italy 3
of Italian

4. Economy expected
Focus on: Italy
to contract by
1.8%
12.2%
11%
59.4%
Economic outlook
in 2013
0.2%
6.6%
5.4%
The Italian economy is expected
by 1.8% this year, with
growth of only 0.2% forecast for 2014. The eurozone as a whole exited
recession in Q2 and a healthier outlook for the key export markets
of France and especially Germany following the re-election of Angela
Merkel, should help exports grow by around 1.0% in both 2013 and
2014. Growth of around 1% per annum is forecast in 2015-17,
remains a
dependent on a sustained improvement in external conditions. key
forecast growth
in 2014
5.4%
to contract
Ranked in
the top 6
Australia
trade partner
Competitiveness remains a
Italy is still running a primary surplus –
in major markets wages rising much faster thankey issue with
productivity
meaning the budget is in surplus excluding
over the past decade. However, fractious
interest payments – and the overall budget
Combined in 2013
balance is forecast to fall from -3.5% global politics and the constant threat of
to -2.6% by 2017. However, net government government collapse may prevent the
coalition led by Enrico Letta from
debt remains greater than the value of the
entire economy – amongst advanced
implementing potentially unpopular
economies only Greece, Japan and Portugal
structural reforms to improve labour
and product markets.
have larger debt piles – and is expected to
in financial services
peak at 106% of GDP in 2014. Balancing
2012
the reduction of the debt burden with
efforts to boost growth and reverse a rise
Economy expected
in unemployment – which is expected
global accountancy by
to contract
to remain above 10% in the short to
Economy expected
medium-term – is a key challenge.
to contract by
revenues of
$300m
One of the
‘large six’
organisations
as recognised
in
by Wall Street 2013
1.8%
hedge funds,
Providing services for
asset managers,
fund administrators,
in 2013
special purpose vehicles
0.2%
and mutual funds
Over
1.8%
0.2%
forecast growth
in 2014
60%
forecast growth
in 2014
Australia
of our member firms’
top clients
General government net debt (% GDP)
100%
Greece
155%
134%
Japan
112%
Portugal
Italy
103%
Ireland
102%
US
88%
France
84%
UK
83%
Spain
Germany
72%
57%
120+
120+
$1.8trn
1.2 billion inhabitants and growing
Source: International Monetary Fund (2013)
countries where our
400
business
Audit, Tax and
countries where our
and Advisory
professional
Audit, Tax and work together
15% 16% gross domestic product
expect to
interviews
increase
and Advisory
of businesses
expect revenue
to rise
1
10.4
globa
We are t
accou
Focus on: Italy 4

5. treet managers,
asset
fund administrators,
Focus on: Italy
by Wall Street
hedge 1.2 billion inhabitants and growin
funds,
special purpose vehicles
1.2 billio
Business growth prospects
and mutual funds
%
60%
$1.8trn
ents
top clients
12%
Business confidence in Italy remains fragile. In Q2-2013, -20% of business leaders
expressed optimism in the economic outlook for the next 12 months (indicating that
a majority were pessimistic). This was slightly above the southern Europe average
(-29%) but well below the eurozone result (-8%).
This lack of confidence feeds through to Italy’s business growth prospects. Just 16%
of business leaders expect to see revenues increase over the next 12 months, slightly
below the eurozone average (22%). This is well down on pre-crisis levels and remains
around half of the result in 2011, when the region appeared to be recovering from the
financial crisis. Expectations for profits are similarly weak: across 2013, just 9% on average
have indicated an expectation for profits to rise, although encouragingly this figure rose
to 30% in Q2, up from -10% in Q1.
As confident businesses are more likely to take on risk, it is perhaps no surprise that
investment plans in Italy remain subdued. Just 15% expect to increase investment in plant
and machinery over the next 12 months, below the eurozone average (25%) and some still
well down on pre-crisis levels (51% in 2008).
Net percentage of businesses optimistic for their
economy (Q2-2013)
Net percentage of businesses expecting to increase revenue
(next 12 months)
Over
400
business
interviews
70%
increase
investment
l services
of businesses
expect revenue
to rise
unemployment
Above the
rate
39%
2%
EU
Eurozone
Italy
Southern
Europe
-8%
Global
interviews
of
15% 16% our member firms’ product 16%
15%
gross domestic
expect to
expect to
pect
r firms’
27%
400
business
-20%
-29%
BRIC average
Talent
shortage
hampers
growth
Source: Grant Thornton IBR 2013
Low demand
60%
increase
increase
40%
Above the
30%
39%
20%
BRIC average
10%
remains a
concern for
52%
of Italian
businesses
investment
50%
operate in financial services
of busine
expect rev
to rise
2007
2008
2009
Talent
2010
Source: Grant Thornton IBR 2013
Low demand
2011
remains a
concern for
2012
shortage
hampers
growth
2013
Italy
52%
of Italian
Eurozone
businesses 5
Focus on: Italy

6. 1.2 billion inhabitants and growin
Focus on: Italy
60%
400
Business growth constraints
Continuing economic and political uncertainty continues to dampen
business
the growth prospects of Italian businesses. Over two-thirds (68%)
interviews
say economic uncertainty is likely to constrain their expansion plans
over the next 12 months, the same as southern Europe and well above
the eurozone average (49%).
ur member firms’
op clients
Perhaps of even more concern for the
government, with a VAT rise and new
services tax due to land in October 2013
and early 2014 respectively, and labour
market reforms being considered, is the
citing of bureaucracy (rules and regulations)
as the second most pressing growth
constraint. At 55% this is well above both
the southern Europe (43%) and eurozone
(37%) averages.
Low demand remains a concern for more
than half of Italy’s businesses (52%), rising
to almost three-quarters (72%) in Q2-2013
ate in financial services
$1.8trn
Percentage of businesses citing factor as a constraint on growth
15% 16% gross domestic product
expect to
of businesses
68%
alone. Again this is above bothexpect revenue
the eurozone
(35%) and southern Europe (50%) to rise
averages.
The cost and availability of finance are
investment
affecting around two in five Italian businesses,
well above the eurozone average and close to
double the rate before the financial crisis.
Talent
shortage
hampers
growth
increase
Above the
39%
55%
68%
49%
Economic uncertainty
52%
BRIC average
erag
35%
Bureaucracy
50%
42%
43%
23%
Cost of finance
Low demand
Low demand
43%
37%
remains a
concern for
52%
of Italian
businesses
22%
39%
24%
41%
Shortage of finance
13%
11%
Lack of skilled workers
Italy
Eurozone
Southern Europe
Focus on: Italy 6

7. Focus on: Italy
Net percentage of businesses expecting to increase selling price (next 12 months)
Restoring competitiveness
A key aspect of the eurozone sovereign debt crisis has been
the inability of economies to devalue their currencies to boost
the price competitiveness of their goods and services. However,
as a consequence of severe austerity measures and low levels of
economic activity, economies such as Spain have gone through
a painful internal devaluation, lowering wages and selling prices
relative to their competitors.
The IBR results indicate that Italian
businesses have not followed Spanish firms
down this path. Over the past 12 months,
net 13% of Italian businesses have indicated
an expectation to raise prices compared
with -11% of Spanish peers. Since 2011,
a majority of Italy’s businesses have raised
prices whilst a majority in Spain have
slashed theirs. Over the next 12 months,
37% of Italian businesses plan to raise wages,
compared with just 28% of Spanish peers.
Tellingly, Spain’s unit labour costs have fallen
10% from their 2009 peak. Italy’s have risen
by almost 5%.
There are both positive and negative
consequences of this approach. The key
positive is the effect on exports: in Spain
the number of exporting businesses has
increased by 28% and merchandise exports
have increased by 20% since 2007, with
a greater share going outside the EU. Net
31% of Spanish businesses expect to increase
exports over the next 12 months, compared
to just 10% in Italy.
The downside is the effect on jobs.
Over the past 12 months, just net -1% of
businesses in Italy have shed people. This
compares with -24% in Spain where
businesses have been losing workers
consistently since 2009. Consequently,
the unemployment rate is touching 27%
in Spain – more than double the rate in
Italy – rising to 57% for young people.
50%
40%
30%
20%
10%
2007 2008 2009
2010 2011 2012 2013
-10%
Italy
Spain
-20%
Net percentage of businesses expecting to increase exports (next 12 months)
35%
30%
25%
20%
15%
10%
Italy
Spain
2007 2008 2009 2010 2011 2012 2013
Source: Grant Thornton IBR 2013
Focus on: Italy 7

8. IBR 2013 methodology
The Grant Thornton International Business Report (IBR) is the leading mid-market business survey in the
world, interviewing approximately 3,300 senior executives every quarter in listed and privately-held businesses
all over the world. Launched in 1992 in nine European countries, the report now surveys more than 12,500
businesses leaders in 45 economies on an annual basis, providing insights on the economic and commercial
issues affecting companies globally.
The data in this report are drawn from interviews with chief executive officers, managing directors,
chairmen and other senior decision-makers from all industry sectors in businesses with 100-499 employees.
Q2 data is drawn from 3,300 interviews globally (50 in Italy) conducted in May 2013. 2013 data is
drawn from over 12,500 interviews (200 in Italy) conducted between September 2012 and May 2013.
To find out more about IBR, please visit: www.internationalbusinessreport.com.
Dominic King
Grant Thornton International Ltd
Global research manager
T +44 (0)207 391 9537
E dominic.king@gti.gt.com
Alessandra Morganti
Bernoni Grant Thornton
Main IBR contact
T +39 02 006 339 33
E alessandra.morganti@bernoni.it.gt.com
© 2013 Grant Thornton International Ltd.
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