Italy’s demographics are worst in Europe for growth: Report

Milan: Italy’s demographics are the worst in Europe in terms of economic growth potential between 2023 and 2040, Scope Ratings said on Oct 9, with a rapidly ageing population posing a threat to the country’s strained public finances.

In 2023, births in Italy fell for a 15th consecutive year to hit a new record low of 379,000, the lowest number since the country’s unification in 1861, official data showed.

Italy’s “working age population is set to record an almost 19 per cent decline between 2023 and 2040 – the biggest reduction in Europe – outpacing reductions expected in Germany, Spain (both at 14 per cent) and France (2 per cent)”, the Germany-based agency wrote in a report.

The shrinking workforce in the euro zone’s third-largest economy underlines “the growing importance of labour market reforms for Italy’s long term economic prospects”, it added.

The country’s employment rate is already the lowest in the 27-nation European Union.

In 2023, 66.3 per cent of Italians aged between 20 and 64 had a job, compared with an EU average of 75.3 per cent, according to Eurostat data.

The situation is especially critical for women, who struggle to combine motherhood and work.

The Bank of Italy has said getting more women into the labour force is imperative to support long-term economic growth and make the country’s almost €3 trillion (S$4.3 trillion) debt pile sustainable.

The Italian economy has been among the most sluggish in the euro zone since the single currency was launched in 1999.

A strong growth rebound from the Covid-19 pandemic was fuelled by costly state incentives for energy-saving home improvements and is already petering out.

In September, national statistics institute Istat revised down the 2023 growth rate to 0.7 per cent from 0.9 per cent, and Economy Minister Giancarlo Giorgetti told Parliament on Oct 8 that the 2024 goal of 1 per cent may be out of reach.

That echoed comments made the day before by the Bank of Italy and Rome’s parliamentary budget watchdog.

Nonetheless, Scope Ratings said in its report that it still saw Italy’s growth at around 1 per cent in 2024 and 2025, in line with the government’s medium-term structural budget plan currently before Parliament.

Over the next few weeks, the plan, which sets out Rome’s economic and public finance goals to 2029, will face scrutiny from ratings agencies S&P Global, DBRS, Fitch, Moody’s and Scope.