Italy: Political Uncertainty Will Adversely Impact Business Environment

The rejection of the Italian Prime Minister Matteo Renzi’s referendum in December, whereby the number of decision makers in the senate would have been reduced significantly-decreasing the time in implementing laws, indicates the bending of popular sentiment towards the far right, which is known to oppose such reforms. Such inclinations will negatively impact the Italian business landscape, with the country already in dire need of reforms aimed towards making business operations easier. Italy’s Regulatory Quality Ranking (a sub-ranking of the World Bank’s Worldwide Government Indicator rankings) at 54th out of 202 nations in 2015, which was already in the bottom 3 in comparison to other Western European nations, is expected to fall even further. This indicates that businesses in Italy might find it tougher to function. Adding to this is the growing popularity of the far-right Eurosceptic Five Star Movement, especially with regards to Italy’s next general election. If such a party comes into power, it may not pass the much needed labour market and tax reforms, exacerbating the issue of high unemployment and low growth in the nation.

Operational Risks in Italy

Source: Euromonitor International from Transparency International/Institute for Economics and Peace/UNDOC/World Bank

Note: Global Terrorism Index 2015 scores were calculated for 162 countries. A higher score (out of 10.0) in the Global Terrorism Index implies a worsening country environment related to terrorism. A higher ranking in the Rule of Law Index implies better governance.

For further information, kindly refer to the Italy’s Business Dynamics Country Briefing report.