{
  "title": "Italy: Staff Concluding Statement of the 2016 Article IV Mission",
  "publication": "IMF News, May 23, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs052316",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs052316",
  "overlayPath": "/en/news/articles/2015/09/28/04/52/mcs052316/index.md",
  "summary": "Describes the preliminary findings of IMF staff at the conclusion of certain missions (official staff visits, in most cases to member countries).",
  "publishDate": "2016-05-23",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Describes preliminary findings of IMF staff at the end of an official staff visit (mission) under Article IV.\n- The authorities have consented to publication; views are those of IMF staff and do not necessarily represent the IMF Executive Board.\n- The mission will prepare a report for the IMF Executive Board subject to management approval."
    },
    {
      "heading": "Recent macroeconomic developments and near-term outlook",
      "content": "- The economy grew by 0.8 percent in 2015 and continued to expand in the first quarter of 2016.\n- Buoying factors: exceptionally accommodative monetary policy, favorable commodity prices, supportive fiscal policy, and improved confidence from wide-ranging reform efforts.\n- Labor market: conditions are gradually improving; the unemployment rate remains above 11 percent, with considerably higher levels in some regions and among the youth.\n- Financial sector: nonperforming loans (NPLs) appear to be stabilizing but bank balance sheets remain strained.\n- Public debt: inched up to just under 133 percent of GDP, limiting fiscal space to respond to shocks.\n- Growth projections on planned policies:\n  - 1.1 percent this year\n  - about 1¼ percent in 2017–18\n- Risks: downside-tilted, including financial market volatility, Brexit, the refugee surge, and headwinds from the slowdown in global trade.\n- Longer-term implications:\n  - Return to pre-crisis (2007) output levels only by the mid-2020s under projected growth.\n  - Widening of Italy’s income gap with the faster growing euro area average.\n  - Nominal growth may be too weak to firmly unwind financial fragilities; balance sheet repair would occur over a protracted period.\n  - Continued exposure to risks within an incomplete economic and monetary union."
    },
    {
      "heading": "Structural reform agenda and priorities",
      "content": "- Government has pursued a range of reforms: institutional, public administration, fiscal, labor market, and banking sector reforms.\n- Notable measures and initiatives:\n  - Jobs Act being implemented.\n  - Legislation passed on reform of cooperative and mutual banks.\n  - Insolvency system under revision.\n  - Framework law on public administration approved with some implementing decrees issued.\n  - Reform of the state budget underway.\n  - Legislation passed and a constitutional referendum planned for October on institutional reforms to facilitate decision making and transfer competencies from regions to the center.\n- Priority areas for further reform to lift growth:\n  - Product and service market reform:\n    - An annual competition law is required since 2009 but yet to be approved; a draft law under parliamentary debate seeks to address regulatory barriers.\n    - Strengthen provisions in line with competition authority recommendations and ensure an annual process of adopting pro-competition laws.\n    - Consider enhanced competition in local public service provision, transport, legal and professional services, and full implementation of existing legislation (e.g., retail sector).\n  - Public administration reform:\n    - Advance reforms to improve skill-mix, match positions with skills, align wages with productivity, simplify functions and procedures, rationalize procurement, and tackle privileges and employment in public enterprises, including through privatization.\n  - Wage bargaining:\n    - Modernize the wage bargaining system to broaden scope for firm-level negotiations, especially for smaller enterprises and many in the South, to strengthen the link between wages and productivity and alleviate regional disparities."
    },
    {
      "heading": "Strengthening banks’ ability to support the recovery",
      "content": "- Recent steps and reforms:\n  - Insolvency reforms to reduce time to collect claims and introduced out-of-court enforcement in commercial lending relationships.\n  - Reforms of the cooperative and mutual bank frameworks creating opportunity for consolidation.\n- Additional recommended actions:\n  - Further improve insolvency and enforcement:\n    - More intensive use of out-of-court debt restructuring and a triage approach to identify viable firms.\n    - Systematize the insolvency system, integrate recent reforms, simplify procedures, rationalize appeals, and adopt best practices by courts.\n  - Prudential steps to resolve NPLs:\n    - Require banks to produce comprehensive NPL strategies with operational targets to reduce NPL levels markedly over the medium term via internal workout procedures, outsourcing to external servicers, and sales.\n    - Intensified supervisory oversight including regular NPL reporting and an intensive schedule of on-site monitoring led by collections and workout experts.\n  - Supervisory oversight of consolidation:\n    - Encourage and carefully assess consolidation proposals with focus on balance sheet health, long-term viability, strong governance, and provide clear guidance on supervisory expectations and timelines.\n    - Systematic asset quality assessment for banks not already subject to the European Central Bank comprehensive assessment, with prompt follow-up actions in line with regulatory requirements.\n  - Retail investor protection:\n    - Review potential anomalies surrounding bank retail debt issuances and address issues found.\n    - Prevent irregular selling practices to retail customers by strengthening legal and regulatory safeguards, improving quality of information, and effectiveness of controls.\n  - Role of Atlante:\n    - Recent private sector intervention (Atlante) has helped preserve financial stability and provides a window to press forward on measures to ensure banking system soundness and avoid weighing on participating banks’ profitability.\n    - Bank supervisors should ensure future bank investments are based solely on commercial considerations."
    },
    {
      "heading": "Bolstering fiscal sustainability and policy recommendations",
      "content": "- Fiscal context and recent history:\n  - Sizable fiscal adjustment in 2012–13 led to one of the highest structural primary surpluses in the euro zone.\n  - Fiscal stance turned more supportive of growth thereafter, using up windfall gains from the falling interest bill; debt-to-GDP has continued to edge up.\n  - Debt dynamics are expected to improve in coming years if nominal growth materializes as projected and medium-term fiscal targets are achieved, but improvement will be gradual and vulnerable to shocks (e.g., rise in interest rates).\n  - Ambitious privatization would help lower debt faster.\n- Recommended fiscal strategy:\n  - Remain anchored to an ambitious medium-term consolidation path supported by pro-growth policies, taking advantage of the low interest rate environment.\n  - The mission recommends an evenly-phased adjustment over 2017–19, net of any remaining upfront costs from structural reforms, that would result in a small structural surplus of about ½ percent of GDP by 2019.\n  - Allow automatic stabilizers to operate if adverse shocks materialize.\n  - Support the adjustment with policies prioritizing more efficient spending and less distortive taxation.\n  - To achieve fiscal targets and create space to lower the high labor tax wedge may require difficult political choices, possibly on high levels of social spending and introducing a modern real estate tax.\n  - Do not undermine pension system sustainability.\n  - Broaden tax bases, including by rationalizing relatively large tax expenditures."
    },
    {
      "heading": "Concluding observations",
      "content": "- Timely implementation of complementary and mutually reinforcing financial, fiscal, and structural measures would help boost growth, rebuild buffers, and lower the upfront cost of reforms.\n- Broad political support for comprehensive reforms should be maintained to take advantage of the current recovery and favorable low interest rate environment.\n- The mission thanks the authorities and other interlocutors for helpful discussions.\n\nItaly: Staff Concluding Statement of the 2016 Article IV Mission — May 23, 2016\n\n---\n\n\n References\n\n- Italy and the IMF\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/52/mcs052316"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2015/09/28/04/52/mcs052316/index.md)",
    "[Structured JSON version](/en/news/articles/2015/09/28/04/52/mcs052316/index.json)",
    "[Bundle manifest](/en/news/articles/2015/09/28/04/52/mcs052316/bundle-manifest.json)",
    "Published: May 23, 2016",
    "Describes preliminary findings of IMF staff at the end of an official staff visit (mission) under Article IV.",
    "The authorities have consented to publication; views are those of IMF staff and do not necessarily represent the IMF Executive Board.",
    "The mission will prepare a report for the IMF Executive Board subject to management approval.",
    "The economy grew by 0.8 percent in 2015 and continued to expand in the first quarter of 2016.",
    "Buoying factors: exceptionally accommodative monetary policy, favorable commodity prices, supportive fiscal policy, and improved confidence from wide-ranging reform efforts.",
    "Labor market: conditions are gradually improving; the unemployment rate remains above 11 percent, with considerably higher levels in some regions and among the youth.",
    "Financial sector: nonperforming loans (NPLs) appear to be stabilizing but bank balance sheets remain strained.",
    "Public debt: inched up to just under 133 percent of GDP, limiting fiscal space to respond to shocks.",
    "Growth projections on planned policies:",
    "Risks: downside-tilted, including financial market volatility, Brexit, the refugee surge, and headwinds from the slowdown in global trade.",
    "Longer-term implications:",
    "Government has pursued a range of reforms: institutional, public administration, fiscal, labor market, and banking sector reforms.",
    "Notable measures and initiatives:",
    "Priority areas for further reform to lift growth:",
    "Recent steps and reforms:",
    "Additional recommended actions:",
    "Fiscal context and recent history:",
    "Recommended fiscal strategy:",
    "Timely implementation of complementary and mutually reinforcing financial, fiscal, and structural measures would help boost growth, rebuild buffers, and lower the upfront cost of reforms.",
    "Broad political support for comprehensive reforms should be maintained to take advantage of the current recovery and favorable low interest rate environment.",
    "The mission thanks the authorities and other interlocutors for helpful discussions.",
    "[Italy and the IMF](http://www.imf.org/external/country/ITA/index.htm)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2015/09/28/04/52/mcs052316/index.md",
    "json": "/en/news/articles/2015/09/28/04/52/mcs052316/index.json",
    "bundleManifest": "/en/news/articles/2015/09/28/04/52/mcs052316/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-26T23:51:07.608Z"
}