Economy
GDP (purchasing power parity, 2006 est.): $1.756 trillion.
GDP per capita (purchasing power parity, 2006 est.): $30,200.
GDP growth: 1.9% (2006); 0.1% (2005); 0.9% (2003 est.); 0.4% (2002); 1.8% (2001).
Natural resources: Fish and natural gas.
Agriculture: Products--wheat, rice, grapes, olives, citrus fruits, potatoes, sugar beets, soybeans beef, dairy products.
Industry: Types--tourism, machinery, iron and steel, chemicals, food processing, textiles, motor vehicles, clothing, footwear, ceramics.
Exports (2005 est.): $371.9 billion f.o.b. Partners (2004)--Germany 13.6%, France 12.4%, U.S. 7.9%, Spain 7.3%, U.K. 7.1%; mechanical products, textiles and apparel, transportation equipment, metal products, chemical products, food and agricultural products. Imports (2005 est.): $369.2 billion f.o.b. Partners (2004)--Germany 18%, France 11%, Netherlands 5.9%, Spain 4.7%, Belgium 4.5%, U.K. 4.3%, China 4.2%; machinery and transport equipment, foodstuffs, ferrous and nonferrous metals, wool, cotton, energy products.

ITALY ECONOMY
The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial state ranked as the world's sixth-largest market economy. Italy belongs to the Group of Eight (G-8) industrialized nations; it is a member of the European Union and the Organization for Economic Cooperation and Development (OECD).

Italy has few natural resources. With much land unsuited for farming, Italy is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore Adriatic, constitute the country's most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country's energy sources are imported. Italy's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. Its major industries are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, and fashion and clothing.

Italy's economic growth averaged only 0.66% for the five years ending in 2005; 2006 GDP growth reached 1.9%, largely due to export growth to the Euro zone area.

Italy continues to grapple with excessive budget deficits and high public debt--4.3% and 108% of GDP expected for 2006, respectively. Italy joined the European Monetary Union in 1998 by signing the Stability and Growth Pact, and as a condition of this Euro zone membership, Italy must keep its budget deficit beneath a 3% ceiling. In June 2006, the European Commission warned Italy it had to bring the deficit down to that level by 2007. The budget passed in December 2006 raised sufficient revenues to make that target, even though the budget was derided by many as having no stimulus for growth.

Italy's closest trade ties are with the other countries of the European Union, with whom it conducts about 54.4% of its total trade (2002 data). Italy's largest EU trade partners, in order of market share, are Germany (15.5%), France (11.6%), and the United Kingdom (5.9%). Italy continues to grapple with the effects of globalization, where certain countries (notably China) have eroded the Italian lower-end industrial product sector.

The Italian economy is also affected by a large underground economy--worth some 27% of Italy's GDP. This production is not subject, of course, to taxation and thus remains a source of lost revenue to the local and central government.