Italy

2016 business cost index

89.3

Country ranking

4th / 10

Italy, GDP per capita: US$34,909 (2014), GDP growth rate: 1.0% (2015), Unemployment rate: 11.7% (Q3/2015), Inflation rate: 0.1% (2015)
Locations12016 indexRank12014 indexRank1
Italy89.3498.86
Milan89.52798.381
Rome89.12599.288
1  Overall results for the country and cities. Rank for Italy is relative to 10 countries in both 2016 and 2014. Ranks for cities are relative to 111 cities in 2016 and 107 cities in 2014.
 
Sectors2016 indexRank22014 indexRank2
Digital services83.5499.38
R&D services79.0696.77
Corporate services79.1493.35
Manufacturing92.9499.67
2  Rank is relative to 10 countries in both 2016 and 2014.
 
Cost factors3
  • 19.8% currency depreciation against the US$
  • Lowest increase in total labor costs among study countries
  • Decrease in leasing costs for industrial facilities
  • Decrease in utility costs, for both electricity and natural gas
  • Federal corporate income tax rate cut, plus new R&D tax credit
3  Significant cost trends between 2014 and 2016.
 
Exchange rate sensitivity4IndexChangeRank5
20% appreciationUS$1 = €0.7396.3-7.04
20% depreciationUS$1 = €1.0984.7+4.64
4  "What if" sensitivity scenarios based on appreciation or depreciation relative to the US dollar.
5  Rank among 10 countries assuming equal appreciation/depreciation of all currencies relative to the US dollar.

Locations

National results for Italy reflect the combined results for two major cities: Milan and Rome. Total business costs in these two cities are relatively similar, within 0.5 percentage points of each other in both 2014 and 2016. Since 2014, Rome has moved ahead of Milan in the rankings, primarily due to reductions in facility lease costs. This change has also allowed Rome to move up in the rankings among the European cities examined, from sixth among 10 European cities in 2014, to fourth in 2016.
 

Sectors

Among the four study sectors, Italy ranks consistently as fourth among the 10 countries in all sectors except for R&D services. The introduction of a new federal R&D tax credit in 2015 helps Italy to improve its relative cost advantage over the US in this sector, but more generous R&D incentives in other countries continue to suppress Italy’s ranking in this sector.
 

Cost factors

The rise in value of the US dollar relative to the euro in 2015 is the primary driver of Italy’s improved cost index in 2016 and the significant improvement in rankings for the two Italian cities. However, other cost trends as noted in the table help Italy to move ahead of both France and the UK in the current study.
 

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