Modest Growth: Lombardy Matches National Average
The Bank of Italy’s autumn report reveals a significant slowdown in Lombardy’s economic performance compared to previous years. The region, historically considered Italy’s economic powerhouse, reported GDP growth of only 0.4%, consistent with the national average. Although there are no signs of recession, growth remains sluggish, continuing the trend seen in 2023 and early 2024.
Challenges in Industry and Exports
Lombardy’s industrial sector, once its pride, recorded a steep decline. In the first half of 2024, industrial production dropped by 1.2% due to weak domestic and international demand. Additionally, exports saw a slight contraction of 0.3%, further highlighting challenges in this key sector.
Investments and Construction: Mixed Signals
The Bank of Italy survey noted a drop in revenues during the first nine months of 2024, with businesses forecasting stability in the coming months. Investment spending is also on the decline, with negative projections for both 2024 and 2025. In construction, reduced fiscal incentives caused a slowdown in activity, though public works under the National Recovery and Resilience Plan (PNRR) partially offset this. The €12 billion allocated for infrastructure projects in the region, if fully utilized, could significantly boost Lombardy’s GDP.
Services and Tourism Show Resilience
Amid the overall economic weakness, the services sector displayed robust growth, driven by increased tourism. Spending by international tourists in Lombardy rose by 19.2% in the first half of 2024, with Milan at the forefront of this trend. The rise in arrivals and overnight stays was faster than the national average, representing a rare bright spot in the region’s economy.
Households and Labor Market: Mixed Trends
Household income grew by 2.7% in real terms during the first half of 2024, supported by contractual pay raises. However, consumer spending stagnated at +0.3%, reflecting a cautious attitude despite shrinking bank deposits. Employment rose by 1.2%, and the unemployment rate fell to 3.9%. Yet, the industrial sector saw fewer hours worked and increased reliance on wage support schemes, signaling emerging challenges.
Rising Insolvency Risks for Businesses
The economic slowdown also impacted the solvency of businesses. In the first half of 2024, new non-performing loans reached €2.2 billion, pushing the insolvency rate to 1.8%, up from 1.3% in 2023. While not indicative of a structural deterioration, this trend underscores the current cyclical difficulties.
Conclusion: Lombardy at a Crossroads
Lombardy is grappling with maintaining its status as a national economic leader. While tourism and services provide a glimmer of hope, the industrial downturn and declining investments demand strategic interventions. Efficient use of PNRR funds and efforts to enhance the region’s competitiveness could help revive its economic momentum.