Economy of Italy

The economy of Italy is a highly developed social market economy. It is the third-largest national economy in the European Union, the second-largest manufacturing industry in Europe (7th-largest in the world), the 8th-largest economy in the world by nominal GDP, and the 12th-largest by GDP (PPP). Italy is a founding member of the European Union, the Eurozone, the OECD, the G7 and the G20; it is the eighth-largest exporter in the world, with $611 billion exported in 2021. Its closest trade ties are with the other countries of the European Union, with whom it conducts about 59% of its total trade. The largest trading partners, in order of market share in exports, are Germany (12.5%), France (10.3%), the United States (9%), Spain (5.2%), the United Kingdom (5.2%) and Switzerland (4.6%).

In the post-World War II period, Italy saw a transformation from an agricultural-based economy which had been severely affected by the consequences of the World Wars, into one of the world's most advanced nations, and a leading country in world trade and exports. According to the Human Development Index, the country enjoys a very high standard of living. According to The Economist, Italy has the world's 8th highest quality of life. Italy owns the world's third-largest gold reserve, and is the third-largest net contributor to the budget of the European Union. Furthermore, the advanced country private wealth is one of the largest in the world. In terms of private wealth, Italy ranks second, after Hong Kong, in private wealth to GDP ratio.

Italy is the world's seventh-largest manufacturing country, characterised by a smaller number of global multinational corporations than other economies of comparable size and many dynamic small and medium-sized enterprises, notoriously clustered in several industrial districts, which are the backbone of the Italian industry. Italy is a large manufacturer and exporter of a significant variety of products. Its products include machinery, vehicles, pharmaceuticals, furniture, food and clothing. Italy has a significant trade surplus. The country is also well known for its influential and innovative business economic sector, an industrious and competitive agricultural sector (Italy is the world's largest wine producer), and manufacturers of creatively designed, high-quality products: including automobiles, ships, home appliances, and designer clothing. Italy is the largest hub for luxury goods in Europe and the third luxury hub globally. Italy has a strong cooperative sector, with the largest share of the population (4.5%) employed by a cooperative in the EU.

Despite these important achievements, the country's economy today suffers from structural and non-structural problems. Annual growth rates have often been below the EU average. Italy was hit particularly hard by the late-2000s recession. Massive government spending from the 1980s onwards has produced a severe rise in public debt. In addition, Italian living standards have a considerable North–South divide: the average GDP per capita in Northern Italy significantly exceeds the EU average, while some regions and provinces in Southern Italy are significantly below the average. In Central Italy, GDP per capita is instead average. In recent years, Italy's GDP per capita growth slowly caught-up with the Eurozone average, while its employment rate still lags behind. However, economists dispute the official figures because of the large number of informal jobs (estimated to be between 10% and 20% of the labour force) that lift the inactivity or unemployment rates. The shadow economy is highly represented in Southern Italy, while it becomes less intense as one moves north. In real economic conditions, Southern Italy almost matches Central Italy's level.