In the second quarter of 2016, the Italian recovery was interrupted, reflecting the slowdown in domestic demand. The economy continues to suffer from weak investment. In comparison with 2007, spending was reduced by almost 80 billion euros, significantly affecting investments in construction. The major criticalities concerned non-residential buildings, such as company sheds and infrastructures.
In Italy, the containment of public spending weighed on the dynamics of investments, with a 17 billion euro cut. In 2009, investments absorbed almost 7% of total public outlays; in 2015, we dropped to 4,5%. Investments in civil engineering works, such as ports, railways or soil protection interventions, have been halved, a cut similar to that which has affected expenditure on plant and machinery.
In 2015, the value of the capital stock invested in the Italian economy amounted to 10 thousand billion euros. In the same year, value added approached 1.500 billion. Almost 7 euros of capital were needed to produce one euro of added value. In the second half of the 5s, 30 were enough. Today, to obtain one euro of added value, 1995% more capital is needed than in XNUMX. There are several factors behind this dynamic.
The Italian economy suffers from an inefficient recomposition of capital: over the years, the weight of homes has grown, while that of machinery and production plants has decreased. Furthermore, the sectoral composition of the economy has changed. In the formation of invested capital, the weight of services has increased, a sector which, compared with manufacturing, needs more capital to produce the same amount of added value.
However, the slowdown in the process of accumulation of new capital, a consequence of the sharp fall in investments, also weighs on the dynamics of the Italian economy. In the last three years, net capital, obtained by excluding the wear and tear of individual assets measured by depreciation from the gross value, has decreased: new investments have not been sufficient to compensate for the aging of capital. A process that has particularly affected non-residential buildings and plant and machinery, the productive heart of the economic system.
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