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2017 OECD Economic Surveys: Italy 2017

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Italy is recovering from a deep and long recession. Structural reforms, accommodative monetary and fiscal conditions, and low commodity prices have helped the economy to turn the corner. The Jobs Act, part of a wide and ambitious structural reform programme, and social security contribution exemptions have improved the labour market and raised employment. Yet, the recovery remains weak and productivity continues to decline. Returning the banking system to health will be crucial to revive growth and private investment. More investment in infrastructure will be essential to raise productivity. The government has made significant progress on tackling structural impediments to growth and productivity. Yet public-administration inefficiencies, slow judicial processes, poorly designed regulation and weak competition still make it difficult to do business in Italy. Labour and capital resources are trapped in low-productivity firms, which hold down wages and well-being. Innovative start-ups and SMEs continue to suffer from difficult access to bank and equity finance. Literacy scores are low and job-skill mismatch is one of the highest among OECD countries, depressing earnings and well-being. Many workers are under-skilled in the jobs they hold, highlighting mismatches between workers skills and those required by employers. Improving the education system and labour market policies are crucial to raising real wages, job satisfaction and living standards. The Jobs Act and the Good School reform go in the right direction and need to be fully implemented.

SPECIAL FEATURES: RAISING INVESTMENT; ENHANCING SKILLS

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Assessment and recommendations

Italy is emerging from a long and deep recession (). Macroeconomic policies initiated by the Italian government and supportive monetary policy have contributed to the turnaround, along with lower commodity prices. The Jobs Act and social security contribution exemptions jolted the labour market, leading to rising employment and higher consumer spending. Mildly expansionary fiscal policy is supporting growth. Impressive progress has been made on the structural reform programme. Reforms in different areas, including the labour market, school system and public administration, have been passed and implemented or are in the course of implementation (). Greater focus has also been put on past reforms, with a sharp reduction in the backlog of decrees needed to implement them. The rejection of the constitutional reform in a referendum in December 2016 has heightened political uncertainty but the structural reform process must continue if Italy is to build a more inclusive society and improve growth prospects.

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