Italy Freight Transport Report 2007

The immediate outlook for Italy's transport sector remains difficult. The new government under Prime Minister Romano Prodi is now in place, but its 2007 budget has had mixed reviews and two key international ratings agencies have downgraded Italian debt. The job ahead remains daunting: the need to reduce an outsize fiscal deficit and tackle structural reforms while maintaining unity among its disparate coalition members and holding on to a razor-thin majority in the Senate. For the freight industry, fiscal austerity means most motorway and rail maintenance across the country has been put on hold. Facing an EU investigation, the government may re-think its veto on the Spanish takeover bid for Autostrade, Italy's dominant toll-road operator, but the danger is that it will nevertheless be seen as excessively protectionist and nationalist. Alitalia's financial problems and its search for a saviour drag on, complicating the outlook for airfreight. And in the sea cargo sector, sluggish Italian trade and disorganised ports mean that Italy appears to be losing out on Mediterranean freight growth. BMI's Italy Freight Transport Report predicts that freight traffic, measured in million tonnes-km (mntkm) will increase by an annual average of 1.2% in 2007-2011, on a par with the growth rate that we expect the wider economy to achieve in the same period.

Our forecast takes account of what we could describe as a 'gradual improvement' scenario, in which the fiscal deficit is gradually brought under control and moderate economic growth takes place. In the medium term, this in fact represents an improvement. Although there are clear problems with the underlying competitiveness of both the wider Italian economy and the freight sector, the fact remains that we do not expect any sharp reduction in Italy's 'transport intensity', the underlying relationship between freight traffic and value of output. So the important factor to bear in mind is that even moderately faster economic growth, an annual average of 1.2% in 2007-2011 compared to an average of 0.7% in 2002-2006 should boost freight volumes. We also project that transport and communications GDP, boosted by the telecoms sector, will grow to US$178.1bn by 2011, representing 8.2% of total GDP (up from 8.1% now). Italy's freight transport industry could do better than this, however, and there is a real sense in which it is underperforming its potential. One relatively adverse factor is the operating environment. We have scored the operating environment at 37 (out of a theoretical maximum of 70), which places Italy at the low end of the European ranking. Its weak points include the regulatory and competitive environment. Improving in these areas would make a significant difference to industry performance, as it would boost confidence levels and ultimately, investment.

BMI believes road freight transport will become marginally more dominant by the end of period, although air, sea and rail freight are also forecast to make their contributions to the overall total growth. Road haulage should grow at an annual average of 1.2%, with rail freight expanding by a marginally slower annual average of 1.1%. Measured in tonnage terms, sea freight should rise by 0.6% each year, while airfreight should recover and increase by 1.2% per annum. Across the different modes, then, BMI's conclusion is that while the freight industry will see moderate growth, there remains significant room for improvement and efficiency gains.