Italy’s demographics are worst in Europe for growth, report says

On Wednesday, the 9th of October, Scope Ratings said that Italy’s demographics are the worst in Europe in terms of economic growth potential between 2023 and 2040, and that a rapidly ageing population threatens the country’s strained public finances, reports Reuters.
Italy’s birth rate fell for a 15th consecutive year last year to a new record low of 379 000, the lowest since the country’s unification in 1861, official data showed.
Italy’s “working-age population is set to decline by almost 19% between 2023 and 2040, the biggest drop in Europe, ahead of Germany, Spain (both down 14%) and France (2%),” the German-based agency said in its report.
It added that the shrinking labour force in the euro area’s third largest economy underlines “the important role of increasing labour market reforms for Italy’s long-term economic prospects”.
The country already has the lowest employment rate in the 27 countries of the European Union (EU). According to Eurostat, 66.3% of Italians aged between 20 and 64 had a job last year, compared to the EU average of 75.3%.
The Bank of Italy stresses the need to increase women’s participation in the labour market in order to boost long-term economic growth and tackle a national debt of almost three trillion euros, given that many women are struggling to manage between motherhood and work.
The Italian economy, one of the weakest in the euro area since 1999, recovered briefly after the pandemic thanks to large public incentives for energy-efficient housing improvements, but growth is now slowing.
Italy’s national statistics institute revised down its 2023 growth forecast from 0.9% to 0.7% and Economy Minister Giancarlo Giorgetti admitted that the government’s 1% target might be unachievable, reflecting concerns expressed the day before by the Bank of Italy and parliament’s budget watchdog.
However, Scope Ratings said in a report that Italian growth this year and next will remain around 1%, in line with the government’s medium-term structural budget plan, which is currently before Parliament.
Over the next few weeks, the plan, which sets out Rome’s economic and public finance targets until 2029, will be scrutinised by ratings agencies S&P Global, DBRS, Fitch, Moody’s and Scope.