Productive growth in Abruzzo: Asian markets to boost the economy

Last November, the economic update drawn up by the Bank of Italy revealed an average production growth in Abruzzo of 5.3% (Quarterly Indicator of the Regional Economy) for the first half of 2022, in line with the national average. The positivity of this indicator is an important signal for Abruzzo companies, which recorded a growth in turnover during the first nine months of the year. In view of the period characterized by rising raw material costs and international geopolitical tensions, Abruzzo’s production system confirms its solidity: according to the survey conducted by the Bank of Italy, during 2021, pre-pandemic levels of activity in industry in the strict sense would be almost completely recovered.

However, the difficulties that have arisen during the pandemic, especially the lack of raw materials, have caused an inevitable drop in production in several of the main areas of the regional economy. In this regard, the automotive sector, which has always been the strong point of Abruzzo’s industry, should certainly be mentioned, as it suffered a drastic drop due mainly to the general slowdown in the transport sector.

On the other hand, encouraging data in terms of growth can be seen in the chemical-pharmaceutical, metallurgical and rubber products sectors, with a 24.4 % increase compared to the same period in 2021, according to the Bank of Italy’s report on Abruzzo’s economy. In addition, there was also an increase in terms of turnover, mainly due to price increases by many companies in response to the sharp rises in gas and electricity prices.

In any case, according to the aforementioned report, there was a general increase in sales compared to the previous year, particularly for companies with a greater presence in foreign markets.

However, according to the data on trade exchange for the Abruzzo Region for the first half of 2022, published by MAECI’s Economic Observatory, it appears that Abruzzo companies tend to be devoted to EU exports (with the only exceptions of Mexico and Turkey), respectively in seventh and ninth place in terms of value of Abruzzo exports with 152 and 73 million euro.

Therefore, Abruzzo’s export potential in non-EU markets is still largely unexplored. Considering that international economic balances are changing at a frantic pace, however, it is crucial for companies to keep up with these developments in order to remain competitive in an increasingly complex global market.

It is worth thinking of countries such as India, which recently launched a ‘Gati Shaki’ economic plan for the development and investment of technological infrastructures in the country in order to increase its attractiveness in terms of foreign direct investment, especially in a context in which China, due to the pandemic that has not yet been totally overcome and its ‘zero-covid’ policy, has seen its economy perform at lower levels than in previous years, when GDP growth had always been record highs. Many foreign companies are indeed looking to South East Asian countries and India to shift part of their investments, following what is called the ‘China+1’ strategy, which consists of diversifying their production from China to one of its neighbouring countries such as Vietnam or India.

In particular, Vietnam, which shares its northern border with China and to which it is connected by a developed infrastructure network, has been chosen by many foreign companies as an ideal destination to relocate part of their operations. In fact, this country can offer very low labour costs and a large and specialised workforce, which have made it a global production center for companies in the manufacturing sector over the years.

Countries like India and Vietnam are developing at an ever-increasing speed, offering an alternative to Italian and Abruzzese companies looking to Asia to expand their market. Abruzzo’s sectors of excellence, such as electronics, agribusiness and fashion, could actually find fertile ground in these Asian markets, which, being less explored than China, also have a lower level of internal competition between foreign companies. In addition, both Vietnam and India in recent years are seeing the emergence of a wealthy middle class interested in quality Italian products such as those from Abruzzo.

To conclude, the encouraging signs of industrial recovery published by the Bank of Italy undoubtedly point to 2023 as a year of restart for Abruzzo and its economy. In particular, Abruzzo companies operating internationally should take advantage of the evolving situation.

Edited by: Att. Carlo D’Andrea, Vice President of the European Union Chamber of Commerce in China and Managing Partner of D’Andrea & Partners law firm, also with offices in Shanghai and Pescara.

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