The country’s main economic sectors are tourism, fashion, engineering, chemicals, motor vehicles and food. Italy's northern regions are per capita amongst the richest in Europe. After one of the deepest recessions in the OECD area, Italy’s economy has begun a moderate recovery which will strengthen somewhat over the next two years. Investment and exports lead the upturn in demand. Unemployment may be near its peak, but as use of the Cassa Integrazione wage support schemes unwinds it may not fall very fast. Household income growth will remain sluggish and depend on a recovery in self-employment income, which dropped severely during the downturn. Consumer price inflation has picked up during the year but will remain subdued through 2012. These projections assume that sufficient measures are introduced to meet the government’s target for the underlying deficit over the next two years, though weaker growth than in the official projections may prevent the actual deficit falling below 3% of GDP. It will be a challenge to hold the line on these measures, though the benefit of past action has been seen in the relative stability of the interest rate on Italian government debt. To ensure credibility, structural budget measures need to be put in place. In addition, supply-side reforms should be promoted to improve the long-term potential of the Italian economy.

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