remarks by luigi federico signorini at the presentation of the bank of italy ’ s report on economic developments in lombardy luigi federico signorini deputy governor of the bank of italy milan, 5 july 2017 italy has emerged from the longest and deepest recession in peacetime memory. slow and hesitant at first, the recovery is gradually strengthening, and for two years now the trend has been clearly positive. of course, the road ahead is still long and fraught with uncertainty. notwithstanding its recent growth, italy ’ s gdp remains seven percentage points below the level of early 2008. spain ’ s is about to reach that level, while france and germany have already outstripped it by five and eight points respectively. nor should the risks on the horizon be underestimated. and yet, even taking account of the lost ground that will be difficult to make up, recent economic developments have been undoubtedly favourable. in the first three months of this year italy ’ s gdp grew by 0. 4 per cent, exceeding the expectations of the leading forecasters. exports have continued to expand. in the last few years the growth in italian export sales has outpaced that in demand from outlet markets. this was not the case between 1999 and 2009, when italian firms struggled to keep up with competition from emerging economies and even from the other developed countries. the improved export capacity of italian firms has been especially important as it has supported gdp growth in the most testing times of the crisis. since 2010 italy ’ s market shares have stabilized. since 2013 there has been a surplus on the current account of the balance of payments. italy ’ s net foreign debtor position has diminished rapidly in recent years, from 25 per cent of gdp in 2013 to 15 per cent at the end of last year. the investment - to - gdp ratio had shed five percentage points since 2007, when in 2014 it hit a postwar low of 17 per cent. the fall in investment was one of the most conspicuous signs of the crisis : the poor economic outlook discouraged it and its collapse in turn lowered gdp and productivity, making the outlook even worse and triggering a vicious circle. years of low investment led to fixed capital not being renewed, lowering production capacity and contributing to weak gdp growth on the supply side too. however, little by little since 2014 investment has recovered, though the trends by sector and type vary greatly. purchases of capital goods – machinery, equipment and transport equipment – have risen by almost 11 per cent in the last three years : as a share of gdp

months of the year is therefore expected to be temporary. household spending also continues to rise. the recovery has been driven until now by the durable goods sector, which had contracted more than the others in the early stages of the crisis, but in recent years has fared comparatively better owing to the highly accommodative financial conditions. loans to households in the form of home purchase mortgages and consumer loans have increased considerably. the latest available data show that the increase in household spending is now extending to services. real estate wealth, which accounts for over 60 per cent of net italian household wealth, has turned upward again thanks to the initial signs of a recovery in prices. confidence indicators remain high. yet the main driver of consumption is the improvement in income levels and prospects. last year households ’ disposable income increased in real terms by 1. 6 per cent, double the figure for 2015 ; it continued to grow, though at a slightly slower rate, in the first three months of this year too. the consequent improvement in households ’ economic conditions is partly due to net job creation. employment has been increasing since the second half of 2014, though with some fluctuations in the monthly data. the growth is wholly attributable to payroll employment, which has now exceeded pre - crisis levels, while the number of self - employed workers has continued to fall. the recovery in employment has been greater than the mechanical effect of the increase in gdp. this may be partially ascribable to the results of various measures introduced over the last few years, such as those on social security contribution relief, and the reform process that began with the fornero law ( law 92 / 2012 ) and continued with the approval in 2015 of the legislative decrees of the jobs act. according to our estimates, 2 these measures have especially benefited payroll employment and permanent contracts. this is an overview of the recent changes in the main macroeconomic variables. but what is the current situation and what is the short - term outlook? for the quarter just ended, our estimates suggest overall gdp growth more or less in line with that of the previous quarter. the latest quantitative and qualitative indicators all point to a fresh increase in economic activity in services and to a return to growth in manufacturing, which in recent months had stalled a little. sestito, p., and viviano, e. ( 2016 ) ‘ hiring incentives and / or firing cost reduction? ’, banca d ’ italia, questioni di