Economy of Rome, Italian economic miracle, Economy of Italy under Fascism, 1922-1943, Tourism in Italy, Automobile industry in Italy, and Banking in Italy

According to the International Monetary Fund, in 2008 Italy was the seventh-largest economy in the world and the fourth-largest in Europe. Italy is member of the Group of Eight (G8) industrialized nations, it is a member of the European Union, OECD, and the Group of Seven (G7). The country is divided into a developed industrial north dominated by large private companies and a primarily agricultural, state-assisted south. In the post-war period, Italy was transformed from a weak, agricultural based economy into one of the world's most industrialized nations, even so that in 1987, the Italian economy surpassed the British economy, by GDP (nominal), an event known as 'il sorpasso'.

According to the World Bank, Italy has high levels of freedom for investments, business and trade. Italy is a developed country, and, according to The Economist, has the world's 8th highest quality of life. The country enjoys a very high standard of living, and is the world's 19th most developed country, surpassing the UK and Greece. According to the last Eurostat data, Italian per capita GDP at purchasing power parity remains approximately equal to the EU average. On addition to that, Italy has the world's 4th (3rd excluding the IMF) largest gold reserves, that of 2,451.8 tonnes, coming after the USA and Germany, and surpassing France and China.

Despite this, the country's economy suffers from many problems. After a strong GDP growth of +8% from 1964 onwards, the last decade's average annual growth rate lagged with 1.23% in comparison to an average EU annual growth rate of 2.28%. In addition, Italian living standards have a considerable north-south divide. The average GDP per capita in Northern Italy can far exceed the EU average (an example of this could be the Province of Bolzano-Bozen, with an average GDP per capita of €32,900, which is 135.5% of EU average), whilst some regions and provinces in Southern Italy can be considerably below the EU average (such as Campania, which has an average GDP per capita of € 16,294). Italy has often been referred the sick man of Europe, characterised by economic stagnation, political instability and problems in pursuing reform programs.

Firstly, Italy suffers from structural weaknesses due to its geographical conformation and the lack of raw materials and energy resources. The territory is mostly mountainous, so much of the terrain is not suitable for intensive cultivation and communication is made more difficult.

Secondly, the Italian economy is weakened by the lack of infrastructure development, market reforms and research investment. In the Index of Economic Freedom 2008, the country ranked 64th in the world and 29th in Europe, the lowest rating in the Eurozone. The country has an inefficient state bureaucracy, low property rights protection and high levels of corruption, heavy taxation and public spending that accounts for about half of the national GDP. In addition, the most recent data show that Italy's spending in R&D in 2006 was equal to 1.14% of GDP, below the EU average of 1.84% and the Lisbon Strategy target of devoting 3% of GDP to research and development activities.

Thirdly, Italy has a smaller number of world-class multinational corporations than other economies of comparable size, but there are a large number of small and medium companies. This has produced a manufacturing sector often focused on the export of niche market and luxury products, capable of facing the competition from China and other emerging Asian economies based on lower labour costs.

Italy's major exports are motor vehicles (Fiat Group, Aprilia, Ducati, Piaggio); chemicals and petrochemicals (Eni); energy and electrical engineering (Enel, Edison); home appliances (Candy, Indesit), aerospace and defense technologies (Alenia, Agusta, Finmeccanica), firearms (Beretta), fashion (Armani, Valentino, Versace, Dolce & Gabbana, Roberto Cavalli, Benetton, Prada, Luxottica); food processing (Ferrero, Barilla Group, Martini & Rossi, Campari, Parmalat); sport and luxury vehicles (Ferrari, Maserati, Lamborghini, Pagani); yachts (Ferretti, Azimut).

Tourism is one of the fastest growing and most profitable sectors the national economy: with 43.7 million international tourist arrivals and total receipts estimated at $42.7 billion, Italy is the fourth highest tourist earner and the fifth most visited country in the world.

The automobile industry in Italy is also quite large employer in the country, with a labour force of over 196,000 (2004) working in this particular industry industry. The automotive industry makes a significant contribution of 8.5% to Italian GDP. Italy is the 5th largest automobile producer in Europe (2006).

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