Italy

The business relationship between the Italian market and the Basque Country has been traditionally strong, noted for trading in key sectors such as the manufacturing and automotive industries, and technology. Italy is one of the Basque Country’s trade partners, driven by the similar economic structures and a strong presence of small and medium-sized enterprises in both regions. Basque companies have found opportunities on the Italian market to export energy and technological products; partnerships in technological innovation and development will further strengthen the ties between both markets.

Italy, a key trade partner for Basque companies

Italia holds an important position in the global economy, as the eighth largest in the world by nominal GDP, and is a powerhouse in sectors such as manufacturing, design, fashion and machinery manufacturing. In terms of trade, it is one of the main exporters of goods such as vehicles, luxury items, food and machinery. Italy is a key member of the European Union, the G7, and NATO, which gives it significant influence in economic and diplomatic international affairs. Despite facing domestic challenges such as the public debt and the slowing down of growth, Italy continues to be an influential player in global political decision making and in international trade, particularly within the European context.

The Italian economy is the European Union’s third economy and is noted for a diverse structure that combines traditional sectors, such as manufacturing and tourism, with modern industries, based on technology and innovation. Italy is known for its strong industrial base, particularly in the north of country, where most of its production of vehicles, machinery, chemical products, textiles and fashion is located. Italy is also one of the world’s main exporters of luxury goods, food and wines, with a strong presence on global markets.

GDP is forecast to grow by 0.9%, similar to the 1% in 2023, with stable growth driven by the drop in electricity prices and by consumer spending rising by 1.2% due to higher sales and lower inflation. The increase in Italian export demand on the European market will continue to rise between 2025 and 2028. Growth is forecast to be higher than expected between 2025 and 2028, mainly driven by greater consumer spending and European investment grants

Italy’s external sector is one of the cornerstones of its economy and the country is one of the leading export economies worldwide. Italy is known for exporting high quality manufactured products, including vehicles, industrial machinery, chemical products, textiles, fashion and food. Furthermore, Italy is a global leader in the design and manufacturing of capital goods, particularly industrial machinery and equipment.

A surplus of 1.1% of the GDP is forecast in 2024, mainly due to a better trade balance, which will show a greater surplus due to the drop in energy prices. The forecasts for 2025 to 2028 are good, with the surplus gradually rising up to 2% in 2028, driven by the country’s trade surplus.

Italy is one of the EU largest markets, with a large skilled workforce. It is well-connected by land to central Europe, which together with its maritime access to the Mediterranean with ports of great strategic importance make the country a distribution hub for Europe and the Middle East and North Africa.

As regards the automotive industry, great opportunities are expected in the heavy (HCV) and light (LCV) commercial vehicle market, with growth of 17% in commercial vehicles. The energy sector is forecast to show growth of 16% in non-hydraulic renewable energy, which may increase electricity consumption in the country. An upturn in private spending is expected on the consumer goods market, due to lower inflation, higher salaries and the drop in unemployment.

Italy’s economic openness, characterised by an important trade surplus and minimum barriers within the EU, offers opportunities for technological high value investments. Incentives such as tax relief for investment in the South attract foreign investors, although there is certain customs complexity for trade outside the EU. Despite a stable financial system, the complex tax environment can deter new operators who want to enter the Italian market. Companies need to navigate the convoluted Italian regulatory framework and try to mitigate the risks. The favourable but bureaucratic landscape requires strategic planning to harness Italy’s investment and manufacturing potential.

The Italian State has historically played a very active role in the Italian economy; despite a progressive privatisation process in response to EU policies, the state continues to have an active role in the regulation of the economy, particularly in strategic sectors such as telecommunications, transport and energy. The Italian government is striving to make its country more attractive for investment by means of reforms of its financial, banking and tax systems. The tax system is being streamlined and initiatives are being implemented to attract foreign market. The banking marketing is becoming more accessible with it easier to obtain loans.

The openness of the international market benefits from its favourable geographical location and a strong export sector, even though it is rather constrained by an inefficient bureaucratic system and geopolitical tensions. Italy has access to multiple markets, as apart from being a member of the Eurozone, it has very favourable agreements with countries of Asia and Africa.

Italy’s commercial openness is noted for an important trade surplus driven by exports of high range manufactured products, such as machinery and pharmaceutical products. As an EU member, Italy benefits from tariff-free trade, as over 60% of its total trade is within the EU, taking advantage of the geographical proximity and the lack of internal trade barriers. Italy is a vital player in world trade. It is in 16th place of 27 developed markets and is 53rd of 202 world markets in terms of trade openness.

The main trade barriers in Italy faced by non-EU countries in particular are customs red tape and the ensuing delays, mainly due to obsolete systems using paper and costly and slow digitalisation. Italy has protectionist barriers to protect its product market with prices that could mean unfair competition from countries outside the EU. Even though products from the EU are exempt from customs duties, other imports face tariffs of 15%.

The Italian legal system is transparent and its regulations are in line with international legislation, offering a secure legal landscape for companies. The legal system is not completely efficient when fighting corruption, which could be a legal risk for investors. Even though there is robust digital security and intellectual property legislation, it is often complex in practice for companies.

Contact office

Ainara Isasa

Director of Basque Trade & Investment Italy

BASQUE TRADE & INVESTMENT ITALIA

Via Santa Maria Segreta, 6
20123 Milano Italia

+39 02 8424 9620

aisasa@basquetrade.eus

* Office hours:

Monday to Thursday: 7.30 a.m. to 4.00 p.m.
Fridays: 8.00 a.m. to 1.00 p.m.

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